Securities registered pursuant to Section 12(b)
of the Securities Exchange Act:
None
Securities registered pursuant to Section 12(g)
of the Securities Exchange Act:
None
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
☐
No
☒
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
☒
No
☐
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
☒
No
☐
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes
☒
No
☐
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K.
☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the Registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
☒
The aggregate market value of the voting
common equity held by non-affiliates based upon the price at which Common Stock was last sold as of June 30, 2017, the last business
day of the registrant’s most recently completed second fiscal quarter, $2.25, was approximately $26,958,483.
As of April 16, 2018, the number of shares
of the registrant’s common stock outstanding was 45,653,868.
PART I
ITEM 1. BUSINESS
Introduction
Rebel Group, Inc. was incorporated in the
state of Florida on September 13, 2011. Effective April 16, 2013, the Company changed its name from “First Social Networx
Corp.” to “Moxian Group Holdings, Inc.” with “MOXG” as its trading symbol. Also, effective April
16, 2013, the Company increased the number of shares that it is authorized to issue to a total of 600,000,000 shares, including
500,000,000 shares of common stock, par value $.0001 per share (the “Common Stock”) and 100,000,000 shares of preferred
stock, par value $.0001 per share. In addition, effective April 16, 2013, the Company effected a 20-for-1 forward stock split of
its Common Stock, without changing the par value or the number of authorized shares of the Common Stock (the “Forward Split”).
On April 25, 2013, pursuant to a Share
Exchange Agreement, the Company completed a reverse acquisition of Moxian BVI and its wholly-owned subsidiaries, including Moxian
HK, Moxian Shenzhen and Moxian Malaysia (the “Share Exchange Transaction”). The Company acquired the operating business
of Moxian BVI and its subsidiaries and the Company ceased being a shell company as such term is defined under Rule 12b-2 under
the Exchange Act. After the incorporation of the business of Moxian BVI, the Company changed its business to developing a social
network platform that sought to integrate social media and business into one single platform.
On February 17, 2014, the Company incorporated
a new wholly-owned subsidiary, Moxian Intellectual Property Limited, under the laws of Samoa (“Moxian IP”). On February
19, 2014, Moxian HK and Moxian Shenzhen entered into an Assignment and Assumption Agreement with Moxian IP, where Moxian HK and
Moxian Shenzhen assigned and transferred all of the intellectual property rights that they respectively owned in connection with
the Moxian business (the “IP Rights”) to Moxian IP in consideration of $1,000,000. As a result, the Company then owned
and controlled such IP Rights through Moxian IP.
On February 19, 2014, the shareholders
then holding a majority of the outstanding shares of the Company approved and authorized the Company to enter into a License and
Acquisition Agreement (the “License and Acquisition Agreement”) with MOXC, pursuant to which the Company sold 100%
of the equity interests of Moxian BVI together with its subsidiaries to Moxian CN Group Limited, a wholly-owned subsidiary of MOXC
(“Moxian CN Samoa”) for $1,000,000. The License and Acquisition Agreement closed on February 21, 2014. As a result,
Moxian BVI, together with its subsidiaries, Moxian HK, Moxian Shenzhen, and Moxian Malaysia, became the subsidiaries of MOXC.
Under the License and Acquisition Agreement,
the Company also agreed to grant MOXC the exclusive right to use the Company’s then held IP Rights in Mainland China, Hong
Kong, Taiwan, Malaysia, and other countries and regions where the Company conduct business (the “Licensed Territory”)
as well as the exclusive right to solicit, promote, distribute and sell Moxian products and services in the Licensed Territory
for five years (the “License”). In exchange for such License, MOXC agreed to pay to the Company: (i) $1,000,000 as
a license maintenance royalty each year commencing on the first anniversary of the date of the License and Acquisition Agreement
and (ii) 3% of the gross profit resulting from distribution and sale of our products and services on behalf of the Company as an
earned royalty. In addition, MOXC had the right to acquire the new IP Rights that are developed by the Company and sub-license
such rights to a third party. MOXC was also under the obligation to develop the social media market of our products and services
in the Licensed Territory. This agreement was subsequently terminated as noted later in the documents.
The Company sought to acquire a new business
in the technology area and as a result, on July 23, 2014, the Company changed its name from “Moxian Group Holdings, Inc.”
to “Inception Technology Group, Inc.” Also, effective July 23, 2014, the Company effected a 1-for-5 reverse split of
its issued and outstanding Common Stock. However, no acquisition of a technology business was closed or consummated.
On December 5, 2014, the Company amended
the Articles of Incorporation to change its corporate name from “Inception Technology Group, Inc.” to “Rebel
Group, Inc.” and effectuated a 1-for-20 reverse stock split of its Common Stock, without changing the par value or the number
of authorized shares of the Common Stock (the “Reverse Split”).
The business plan of the Company was originally
to utilize a social network platform that integrated social media and business into one single platform to promote businesses of
merchants and assist the targeted clients to find consumers online and bring them into real-world stores. Immediately after the
completion of the Share Exchange Transaction and the Equity Transfer Transaction, as such terms are defined below, the Company
discontinued its social media business and changed its business to producing dynamic Mixed Martial Arts (“MMA”) fighting
events and promoting MMA fighting in China and Singapore.
Rebel Holdings Limited (Rebel FC),
which utilizes the trade name of Rebel Fighting Championship, was incorporated on October 28, 2014 in the British Virgin
Islands and engages in the business of hosting and promoting MMA events.
Pure Heart was incorporated under the laws
of Singapore on August 24, 2000 under the name “Soo Kee Coffeeshop Pte. Ltd.” Effective November 27, 2002, it changed
its name to “Asia Pacific Export International Pte Ltd.” It later changed its name from “Asia Pacific Export
International Pte Ltd.” to “Pure Heart Entertainment Pte Ltd.” on June 7, 2013. As of October 30, 2014, it became
a wholly owned subsidiary of Rebel FC. Pure Heart is an operating subsidiary of Rebel FC and is dedicated to hosting and promoting
MMA events.
SCA Capital Limited, a British Virgin Islands
company, was incorporated on January 7, 2011 and holds the intellectual property rights relating to the Rebel FC business. On October
28, 2014, SCA Capital became a wholly-owned subsidiary of Rebel FC.
Share Exchange Transaction
On January 30, 2015, REBL, Rebel FC and
the sole stockholder of Rebel FC who owned 100% of Rebel FC (the “Rebel FC Stockholder”) entered into and
consummated transactions pursuant to a Share Exchange Agreement (the “Share Exchange Agreement,” such transaction referred
to as the “Share Exchange Transaction”), whereby the Company issued to the Rebel FC Stockholder 20,700,000 shares of
its Common Stock, par value $.0001 per share, in exchange for 100% of the equity interests of Rebel FC held by the Rebel
FC Stockholder. The shares of our Common Stock received by the Rebel FC Stockholder in the Share Exchange Transaction then constituted
approximately 90% of our issued and outstanding Common Stock. As a result of the Share Exchange Transaction, Rebel FC, together
with its subsidiaries, Pure Heart and SCA Capital, became REBL’s wholly-owned subsidiaries.
The Share Exchange Agreement contained
representations and warranties by us, Rebel FC and the Rebel FC Stockholder which are customary for transactions of this
type such as, with respect to the Company: organization, good standing and qualification to do business; capitalization; subsidiaries;
authorization and validity of the transaction and transaction documents; consents being obtained or not required to consummate
the transaction; no conflict or violation of Articles of Incorporation; with respect to Rebel FC: authorization; capitalization;
and title to Rebel FC’s ordinary shares being exchanged, and with respect to Rebel FC Stockholder: authorization;
no conflict or violation of law; investment purpose; reliance on exemption on the Company’s Common Stock to be exchanged;
and transfer or resale pursuant to the Securities Act.
Our acquisition of Rebel FC and its subsidiaries
pursuant to the Share Exchange Agreement was accounted for as a reverse merger and recapitalization effected by a share exchange.
Rebel FC was considered the acquirer for accounting and financial reporting purposes.
Equity Transfer Transaction
The Transaction
Simultaneously with the consummation of
the Share Exchange Transaction, the Company entered into an Equity Transfer Agreement (the “Equity Transfer Agreement,”
such transaction, the “Equity Transfer Transaction”) with MOXC, to sell, transfer, and convey 50,000 ordinary shares
of Moxian IP, constituting 100% equity interests of Moxian IP for $6,782,000 (the “Moxian IP Transfer Price”). The
Moxian IP Transfer Price for Moxian IP is based on an appraisal report, dated November 15, 2014, prepared by Grant Sherman Appraisal
Limited, an independent appraiser.
Termination of the License and Acquisition
Agreement
As set forth above, on February 19, 2014,
the Company and MOXC entered into a License and Acquisition Agreement, where the Company granted to MOXC the exclusive right to
use the intellectual property rights owned by Moxian IP and in consideration of such license, MOXC agreed to pay (i) $1,000,000
as license maintenance royalty each year commencing on the first anniversary of the date of the License Agreement; and (ii) 3%
of the gross profits resulting from the distribution and sale of the products and services on behalf of the Company as an earned
royalty. Pursuant to the License and Acquisition Agreement, the Company also agreed to sell, assign, transfer, convey and deliver
all of the equity interests of Moxian Group Limited, a corporation incorporated under the laws of British Virgin Islands to Moxian
CN SAMOA, a wholly-owned subsidiary of MOXC, for the consideration of $1,000,000 (such transaction, the “Sale of Moxian BVI,”
and the purchase price, the “Moxian BVI Transfer Price”). Immediately prior to the execution of the Equity Transfer
Agreement, the Moxian BVI Transfer Price was not paid and no license maintenance royalty or earned royalty under the License and
Acquisition Agreement had accrued.
Therefore, under the Equity Transfer Agreement,
the Company and MOXC agreed to terminate the License and Acquisition Agreement so that the liabilities of MOXC and the rights of
the Company thereunder, other than the Moxian BVI Transfer Price, were terminated.
Pursuant to the Equity Transfer Agreement,
MOXC agreed to repay the Moxian IP Transfer Price and the Moxian BVI Transfer Price in the aggregate of $7,782,000 in the form
of a convertible promissory note (the “Note”) issued by MOXC. The maturity date for the Note was October 30, 2015 with
1% interest per annum, and all sums due under this Note could be converted at the conversion price of $1.00 per share (“Conversion
Price”) at the option of MOXC, if the volume weighted average price (“VWAP”) of MOXC’s common stock for
a period of thirty (30) trading days immediately prior to the date of conversion was higher than the Conversion Price. Under the
Note, MOXC had a right of first refusal to purchase the shares issuable upon conversion at the price of 80% of the VWAP for 30
trading days immediately prior to the date of the proposed repurchase by MOXC.
On August 14, 2015, due to the VWAP of
the MOXC Common Stock for 30 trading day prior to August 14, 2015 was higher than $1.00, which triggered the clause of conversion
under the MOXC Note, MOXC notified us that it elected to convert the amount of $3,891,000 under the MOXC Note into 3,891,000 shares
of the MOXC Common Stock at the conversion price of $1.00 (the “August Conversion”). As a result of the August Conversion,
the remainder amount of the MOXC Note was $3,891,000.
On September 30, 2015, MOXC notified us
that it elected to convert the remainder of the MOXC Note, of $3,891,000 into 3,891,000 shares of the MOXC Common Stock (the “September
Conversion”). After the August Conversion and the September Conversion, consequently, all of the MOXC Note was converted
in to the total of 7,782,000 shares of the MOXC Common Stock with no amount of the MOXC Note outstanding. On May 24, 2016,
MOXC’s Board of Directors approved a reverse stock split of MOXC’s issued and outstanding shares of common stock, at
a ratio of 1-for-2 (the “MOXC Reverse Stock Split”). The MOXC Reverse Stock Split was effective on June 20, 2016, and
pursuant to the MOXC Reverse Stock Split, the Company’s shares in MOXC were reduced from 7,782,000 shares to 3,891,000 shares.
Plan and Completion of Disposition
On January 30, 2015, the Board of Directors
of the Company approved and submitted for approval of the Company’s shareholders with a majority of voting rights, a Plan
of Disposition (“Plan of Disposition”). Under the Plan of Disposition, the Company proposed to distribute the proceeds
resulting from the Equity Transfer Transaction and Sale of Moxian BVI, within one year from the date of the Equity Transfer Transaction,
to the shareholders as of January 29, 2015, on a pro-rata basis except for Rebel FC Stockholder, who agreed to waive such proceeds.
On January 30, 2015, the Company’s shareholders with a majority of voting rights approved the Plan of Disposition. No additional
vote of the Company’s shareholders was required or sought in connection with the Plan of Disposition, and the Company’s
record shareholders had no appraisal rights in connection with the proposed transactions under the Plan of Disposition. The
Plan of Disposition was not completed within the planned one year period, and was delayed due to MOXC’s then proposed underwritten
offering and exchange listing. On May 24, 2016, due to the MOXC Reverse Stock Split, effective on June 20, 2016, the Company’s
shares in MOXC were reduced from 7,782,000 shares to 3,891,000 shares. The Company is in the process of preparing and approving
a revised Plan of Disposition, which takes into account that the Company currently holds 3,891,000 shares of MOXC which are currently
valued at $11,634,090 and pursuant to which the Company plans to distribute, as a dividend, the 3,891,000 MOXC shares to the Company’s
shareholders as of January 29, 2015, on a pro-rata basis, that would have been entitled to share in the proceeds of the sale of
the MOXC shares by the Company under the original Plan of Disposition, if the Company had consummated such sale. The common stock
of MOXC is currently quoted on the Nasdaq under the symbol MOXC at a price of $3.70 per share as of April 13, 2018.
On January 30, 2015, we completed the acquisition
of Rebel FC pursuant to the Share Exchange Agreement. The acquisition was accounted for as a reverse merger and recapitalization
effected by a Share Exchange Transaction. Rebel FC was considered the acquirer for accounting and financial reporting
purposes.
Also on January 30, 2015, we transferred
100% equity interests of Moxian IP to MOXC pursuant to the Equity Transfer Agreement. As a result of the Equity Transfer Transaction,
Moxian IP ceased to be our subsidiary, and the Company changed its business from licensing intellectual property rights relating
to a social network to organizing and promoting MMA fighting events in Asia.
Recent Developments
On October 1, 2017, the Company and Pure
Heart Entertainment Pte Ltd., a wholly owned subsidiary of the Company and a company incorporated under the laws of Singapore (“Pure
Heart”) entered into a Share Transfer Agreement (the “Share Transfer”) with Naixin Qi, an individual (the “Shareholder”),
the sole shareholder of Qingdao Quanyao Sports Consulting Co. Ltd, a company organized under the laws of PRC (the “Target
Company” or “Quanyao”).
Pursuant to the Transfer Agreement, Pure
Heart, through a wholly foreign owned entity (the “WOFE”) Rebel Shanghai Limited (“Rebel Shanghai”), incorporated
under the laws of PRC on June 21, 2017, agreed to acquire 100% of the outstanding equity interests (the “Equity Stake”)
of the Target Company from the Shareholder with the purchase price valued at approximately $7,000,000 consisting of the following:
(i) the forgiveness of debt owed by the Target Company to Pure Heart as of October 1, 2017, in the amount of approximately $2,825,000
(the “Forgiven Debts”) and (ii) 12,000,000 shares (the “Shares”) of the common stock of the Company, par
value $.0001 per share (the “Common Stock”) (together the “Purchase Price”). The purchase price was based
on valuation report by an independent appraisal firm.
The Transfer Agreement was executed on
November 21, 2017 and Quanyao officially became wholly-owned subsidiary of Rebel Shanghai.
Quanyao is a company which was established
under the laws of PRC on December 4, 2014. It organizes, promotes and hosts MMA events in China. Quanyao holds 50% equity of Qingdao
Leibo Sports Culture Co. Ltd. (“Leibo”), a company incorporated under the laws of PRC on January 8, 2015 which also
organizes, promotes and hosts MMA events.
Quanyao and Leibo together held 4 events
in China between 2015 to 2017 under the Rebel brand in accordance with Cooperation Agreement with Pure Heart.
The following diagram sets forth the structure
of the Company as of the date of this Report:
Our website address is
http://www.rebelfightingchampionship.com/en/
. Information
contained on our web site is not part of this Annual Report on Form 10-K or our other filings with the Securities and Exchange
Commission (“SEC”).
Overview of Our Business
The Company, through its subsidiaries,
organizes promotes and hosts MMA events featuring top level athletic talent and delivering top quality events centered around Chinese
fighters and fans. With assistance from contracted production crews, the Company produces and distributes, through the internet
and social media, and sells the rights to distribute to television stations, videos of its MMA events.
The Company seeks to promote MMA in China
through hosting top quality matches, live TV broadcast and inspiring reality series that attract talented fighters from all over
the world. MMA is unarmed combat involving the use of a combination of techniques from different disciplines of martial arts, including,
without limitation, grappling, submission holds, kicking and striking. The styles of martial arts range from Brazilian Jiu-Jitsu,
Judo, Karate, Boxing, Muay Thai, Wrestling, Jeet Kune Do, Taekwondo, Sanshou and various other forms of martial arts. Unlike boxing,
where athletes can only strike with their fists and only above the belt, the fighters in MMA can use punches, kicks, elbows, knee
strikes, takedowns and submissions to win a contest.
Production of the Company’s MMA events
usually involves obtaining sponsorships, signing up fighters, securing event venues, setting up event venues, marketing its events
and producing event videos. The Com
p
any’s events are broadcast
through top sporting entertainment stations, while also focusing on utilizing online platforms for internet streaming in order
to reach audiences. There are also pre-event shows at its live events, which include music performances and fighters’ interviews
and documentaries. .
In addition to television broadcasting,
the Company plans to attract pay-per-view (“PPV”) audiences. The Company believes that the PPV model can be deployed
in China in 2019 with support from selected service providers to enable paid online streaming of the Company’s MMA events.
Currently the Company is still in negotiation with service providers for PPV.
Our Events
The Company hosts live events in which
highly skilled fighters from different martial arts backgrounds compete at different weight classes. We also integrate the introduction
of background information and stories of the athletes into the broadcasting of fighting events.
The Company selects fighters with a distinguished
career for a planned event. After a careful selection process, we market our MMA events by posting on social media or broadcasting
through TV channels, social media platforms, video journals and interviews of the fighters.
The Company has successfully hosted six
events to date.
The Company successfully held two events
in 2017. On August 12, 2017, an event titled
Battle Royal: Quest for Glory
was held at Kerry Hotel in Pudong, Shanghai together
with Quanyao. On September 2, 2017, the Company held another event titled
China vs. The World
at Shenzhen Stadium in Shenzhen
together with Quanyao. Shenzhen event was broadcast live on Qingdao TV and several major social media platforms. For the two events
in year 2017, Quanyao paid Pure Heart USD$200,000 per event for royalty and management fee in accordance with 2017 Cooperation
Agreement.
The Company plans to hold eight events
in 2018 with two in Shanghai, two in Guangzhou, two in Shenzhen, and two in Beijing. The first event in 2018 will be held on April
29, 2018 at the Kerry Hotel in Shanghai. Events in 2018 will be broadcast live by Guangdong Sports TV, and other satellite TV stations
and social media platforms where negotiations are ongoing. However, there can be no assurance that such events will occur, or even
if they do occur there can be no guarantee that such events will be successful or profitable.
Rules of MMA
There is no official or non-official organization
or association governing the MMA industry. However, different promoters have agreed that their MMA fighting events would abide
by the Unified Rules of MMA, adopted by all state athletic commissions in the United States as well as many other promoting organizations
under various jurisdictions worldwide.
One of the basic rules of MMA is that fighters
shall not fight against another fighter of a different weight class. Another rule is that fights should be held in a ring or in
a fenced area. Such ring or fenced area has to meet specific requirements.
The Company’s events follow the Unified
Rules of MMA.
Fighters
An important element to a successful MMA
event is to identify and retain suitable fighters. Prior to organizing our events, we reach out to managers of fighters in the
MMA industry in search of suitable fighters for our upcoming events. We then negotiates and enters into our standard contracts
with fighters. Fighters, in addition to combatting in our events, are also required to participate in our press conferences, interviews
and documentaries and, from time to time, to appear on our sponsors’ commercials. In order to attract fans and media from
both international and local markets, we specifically select fighters with distinguished careers, memorable personalities, and
exciting fighting styles.
Development Plan
The Company plans to hold eight events
in China in 2018. The Company plans to broadcast an episodic reality show aimed towards mainstream Chinese TV, which it hopes to
launch in 2018. However there can be no assurance that such events will occur, or even if they do occur there can be no guarantee
that such events will be successful or profitable.
Planned Activities
REBEL Reality Show
We plan to unveil in 2018 a new addition
to our televised content by expanding the REBEL brand beyond the traditional sports market and into mainstream television through
a 12 episode reality TV series, which we hope to air across major Chinese networks. We hope that this show will serve to cross
over to mainstream fans by linking stars built over the course of a season of reality TV to REBEL live events, effectively introducing
a much larger audience to our core product. We hope that the show will also serve the purpose of continuing the brand narrative,
increasing awareness for live events, educating the average viewer on the dynamics and intrigue of Mixed Martial Arts, and serving
as a platform to market company merchandise to a wide audience.
Revenues
Currently, the Company’s revenues
come from the following sources:
Ticket Sales
The Company hosts live MMA fighting events
in stadiums and sells tickets to audiences that attend the live events. Tickets are priced at different levels, ranging from $26
to $273, based on seating locations and availability of complimentary services, such as complimentary drinks and food, free t-shirts,
etc. In addition to ticket sales, we also sell merchandise, such as gloves, T-shirt, to our audience at the live events.
On August 12, 2017, the Company held an
event at titled
Battle Royal: Quest for Glory
at Kerry Hotel in Pudong, Shanghai together with Quanyao. On September 2,
2017, the Company held another event titled
China vs. the World
at Shenzhen Stadium in Shenzhen together with Quanyao. For
the two events in year 2017, Quanyao paid Pure Heart USD$200,000 per event for royalty and management fee in accordance with 2017
Cooperation Agreement.
Central to the success of the Company’s
live events is our ability to sell tickets in the most efficient and effective method possible. Due to the nature of the international
combat sports market and the events production market in general, we rely on a variety of ticketing agents to assist us in distributing
tickets through their extensive personal databases. These agents will vary depending on the chosen event venue and other pre-event
stipulations. Through the combination of reliable agents and our own streamlined marketing systems we believe it will be possible
to maintain a successful online ticket distribution presence for each live event in China.
The Company plans to hold eight events
in 2018 in China and plans to charge between RMB 180 to 1,880 (US $26 to US $273) for tickets to these planned events, with the
final price to be determined based on the location of the event. The first event in 2018 will be held on April 29, 2018 at the
Kerry Hotel in Shanghai. However, there can be no assurance that such events will occur, or even if they do occur there can be
no guarantee that such events will be successful or profitable.
Sponsorship
Sponsorship to our events is in forms of
cash, provision of event venues, equipment and marketing campaign services. Our business model is to obtain sponsorships that are
sufficient to cover the costs of hosting an event prior to incurring substantial costs for organizing an event. In consideration
of the provided sponsorship, our sponsors have exposure in our promotional campaigns in connection with our events, including printing
sponsors’ names and logos on banners and posters at our events, offering sponsors’ products to the audience at our
events, allowing sponsors’ advertisements on our pre-event shows, on our social media pages as well as our website and allowing
fighters to feature in sponsors’ commercials. We work with the sponsors to customize the promotional methods to achieve the
sponsors’ marketing goals. For each event, we target to obtain at least 10 sponsors. We are also seeking to obtain sponsors
for our planned reality show.
TV Distribution
Rebel FC has staff and personnel with the
ability to create and produce its live events and sell the rights to broadcast its events to television stations in Singapore and
China. We intend to distribute our event programs internationally through television distribution agents for a more stable stream
of income. In addition to the broadcast of our live shows and other aired pre-fight footage, we will also look to secure broadcasting
rights for other viable related programming such as the Rebel FC Reality TV Show that we hope will appeal to a larger fan base
and can be used to integrate new fans into our live product.
Pay-Per-View
Pay-per-view (“PPV”) is a type
of pay television and online service by which a subscriber can purchase events to view via private telecast or online. The PPV
model is a model whereby we can broadcast live events on cooperating television stations. Audiences can pay to watch the live events
on their televisions, laptops or handphones instead of going to a stadium. In China or South East Asia, PPV is relatively new and
still in development, but we believe the success of PPV model in the U.S. can be achieved in Asia as well. Rebel FC plans to implement
the PPV model for its live MMA events in 2019. We plan to charge $5 to $10 for each PPV event that the audience watches through
PPV in China.
MMA Event Expenses
The promotion and organization of MMA events
require various types of expenses, a majority of which consist of production, marketing promotion and payments to fighters. Another
significant cost is venue rental fee. Other expenses and costs incurred in connection with our events include equipment rentals,
and staff compensation.
Audience
A majority of the audiences that attended
our events were male, with ages ranging from 18 to 35. Thus, this group is our targeted audience. We also have targeted marketing
and sales for our events to college graduates who had watched sports television programs in the past 12 months and/or had participated
in sports-oriented activities in the past 12 months. The secondary target would consist of males between 35- 45 years old and females
between 18-34 years old. The gender mix would be 70% male and 30% female.
We believe that our targeted audience appeals
to a wide array of advertising and sponsorship verticals (automotive, food and beverage, sports products, consumer electronics,
consumer products), therefore enabling advertisers and sponsors to establish brand awareness and loyalty through our events.
Marketing Strategy
Marketing is essential to the Company’s
operations and business. Brand awareness and engagement of our fans and general audience are key considerations in our marketing
strategy. We utilize marketing and PR activities to reach out to our target audience and the mass media, including open workouts,
road shows, weigh-ins and press-conferences. We also advertise our events on billboards, banners, television ads, bus stop advertisements
and online advertisements. The Company also has a marketing and public relations department, which is dedicated to contacting television
media and other news agencies, hosting press conferences and ensuring sufficient publicity of our events in social media and other
traditional media.
With a focus on customer awareness and
creative branding, the Company seeks to use social media to develop intensive marketing campaigns designed to attract both seasoned
and new fans of combat sports. Rebel FC’s marketing strategy aims to drive traffic and audience growth through working with
social media, public relations firms, strategic partnerships with television stations and sponsors, and advertising agencies. For
instance, we held press conferences for MMA fans and the media to attend at all our events. We also work with gyms and fighting
associations to promote our brand to their members and attract members to attend our events.
We believe that Rebel FC is distinguished
from other MMA promotion companies in a way that we promote our events and fighters with vivid life stories of fighters, which
highlight their passion for MMA. We believe that the behind-the-scene stories may attract audiences by showing how fighters grow
their strength and brevity for the sports. Prior to a live event, we arrange face-to-face interactive sessions between fighters
and audiences who are fans and supporters of these fighters. We believe this promotional method may allow us to communicate with
the audiences and attract their attention to Rebel FC and eventually stimulate their desire to watch our events live or on other
available media. During the events, we also broadcast the stories of athletes to provide deeper understanding of our audience about
the fighters’ lives.
Although Mixed Martial Arts is still a
growing industry, we believe our brand differentiates itself from other international combat sports organizations by combining
entertainment and narrative to create an experience that we believe goes beyond the traditional sports experience. Using local
athletes on dynamic televised live events until the public is acquainted with their personality, style, and back-story, we expect
our fighters to become recognizable, not only inside the ring, but also outside it, serving as brand ambassadors for Rebel FC,
our sponsors, and presenting a positive image of mixed martial arts to our fan-base and mainstream audiences.
Market Opportunities
According to IBIS World’s Martial
Arts Studios market research report in November 2017, the total market size is $4 billion for mixed martial arts revenue worldwide.
The industry is expected to continue growing over the next five years. (
http://www.ibisworld.com/industry/martial-arts-studios.html
).
A robust economic recovery is expected to endow consumers with higher disposable income levels, enabling them to spend more money
on martial arts instruction, particularly costly private lessons. Rising popularity of mixed martial arts will continue to drive
demand for the industry.
There are regular MMA events hosted in
the Asia Pacific region by established fight promoters. Despite being a relatively new promoter, the Company sees the opportunity
for the growth of MMA in the Asian sports market, especially the untapped market in China. China has been reported to be a potentially
significant market for the MMA industry (http://www.businessinsider.com/mixed-martial-arts-is-becoming-popular-in-rural-china-and-ufc-is-looking-to-capitalize-2014-8).
By 2020, the China’s sports industry
market is expected to be worth RMB three trillion (USD434.4 billion), and around RMB five trillion by 2025 – as the Central
Government throws its weight behind sport as a mainstay of both society and of the Chinese economy (http://www.atimes.com/article/chinas-vast-mma-potential-prompts-drawing-battle-lines/).
According to the Mailman Group in China,
MMA has the largest number of references on Chinese social media, outnumbering other traditional sports, such as basket balls and
footballs.
In addition, with the growing use of PPV
in China, online video streaming sites such as Baidu and Tencent have millions of users using their App for streaming of shows.
The Company is currently working with streaming platforms to market our shows, making our events available to a large population
in China (http://www.boxinginsider.com/headlines/chinese-pay-per-view-could-open-up-new-vistas-with-pacquiao-bout/”).
Competition
The main players in the MMA industry include:
i) Ultimate Fighting Championship (“UFC”), which has its focus on the U.S. market, ii) ONE Fighting Championship (“OFC”),
which is based in Singapore and targets the Asia market and iii) Kunlun Fight, a fighting club located in China which broadcasts
its events over the Chinese television channels. Despite the fact that our competitors are well established and have more funds
available for marketing and producing their events than us, and are more reputable among the audiences in MMA, we are concentrating
on the untapped combat sports market of China where we believe we have the resource and experience to penetrate the market and
grow our business there. We seek to engage high quality producers to produce quality videos of our events. These produced videos
are to be broadcasted on the internet and be shared on the social media. We believe this will allow us to expand our market shares
in existing social media mediums. During the fights, we have our audience to engage with our commentators through social media.
This interactive method has been used by other sports media and is assisting brands to gain a traction and proven growth record
of new likes and awareness.
Employees
We maintain a specialized and experienced
team consisting of 25 full time members based in China who are capable of leading temporary out-sourced personnel on a per event
basis. We also have contract personnel for our television and live event productions.
Key Employees
Senior Project Manager – David
Zhang
Mr. David Zhang has more than a decade
of event management experience for well-known brands such as Nike, Chivas, Ballantine, Clarins, Etam, Swarovski, Sanofi and Mercedes
Benz, with Publicis Events China. He was responsible for creating event concept proposals per client’s brief.
Head of Affiliate and Media Sales –
Sophia Ke
Ms. Sophia Ke is a seasoned sales professional
with strong account management experience in the publishing and media industries. Previously Account Director for CNBC China, she
helped local and government clients access the global market via CNBC’s platform.
Head of Marketing – Ellen Li
Ms. Ellen Li brings with her over two decades
of marketing experience in the FMCG industry for established foreign and local companies based in China. She has managed well-known
brands such as Clorox, GZ Masson Group, Heinz and Tate & Lyle.
Head of Sponsorships – Sam Kwan
Mr. Sam Kwan has worked for major companies
such as Li & Fung, Grand and lately, with Mailman in business development and account management for companies such as Heineken
APB, Starbucks, Tesco, Acer, China Telecom, LVMH, AC Milan, UFC, Nike and high profile clients such as Kobe Bryant, Lewis Hamilton
and Conor McGregor.
Media Manager – Raymond Rong
Mr. Raymond Rong spent 6 years in Hupu,
working in a well-known sports media agency with a track record of managing an impressive number of in house and external clients
such as the ICC, NFL, 50 SuperBowl, NBA and Manchester City FC. He specializes in managing business development and advertising
sales.
Intellectual Property
The following are the intellectual property rights that the
Company owns, the details are set forth in the following table:
Compliance with Government Regulation
People’s Republic of China
In order to organize and host a live event
in China, we need to obtain a license from the local Police Department in China. We also need to comply with the rules and regulations
required by the State of Administration Radio Film and Television.
Available Information
The Company’s Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and
15(d) of the Exchange Act, are filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company is subject
to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements, and other information with
the SEC. Such reports and other information filed by the Company with the SEC are available via the Company’s website at
http://www.rebelfightingchampionship.com/en/ when such reports are available on the SEC’s website. The public may read and
copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington,
D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC at www.sec.gov. The contents of these websites are not incorporated into
this filing. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references
only.
Principal Executive Offices
Our principal executive office is
located at 7500A Beach Road, Unit 12-313, The Plaza, Singapore 199591. Our principal telephone number at such location
is +6562941531.
Research and Development
During the years ended December 31, 2017
and 2016, the Company incurred research and development costs of $0 and $0, respectively.
ITEM 1A. RISK FACTORS
Risk Factors
Related to the Business
The Company’s
planned events for 2018 may not occur as planned, or even if they do occur, there can be no assurance that they will be successful
or profitable.
The Company plans
to hold eight events in 2018 with two in Shanghai, two in Guangzhou, two in Shenzhen and two in Beijing. The first event will be
held on April 29, 2018 at Kerry Hotel in Shanghai. However there can be no assurance that such events will occur, or even if they
do occur there can be no guarantee that such events will be successful or profitable.
We may not
be able to develop content to capture audiences or a market share.
The creation,
marketing and distribution of our live entertainment are the core of our business. The production of compelling live content is
critical to our ability to generate revenues across our media platforms. Our failure to continue to create popular live events
and televised programming would likely lead to a decline the attendance at our live events and our audience to the TV shows, which
would adversely affect our results of operations.
We may not
be able to retain or recruit outstanding fighters for our events.
Our success is
largely dependent on our ability to recruit and retain renowned fighters to fight in our event. We cannot assure you that we will
be able to continue to identify and retain well known, popular or top fighters in the future. Additionally, we cannot guarantee
that we are able to retain existing fighters during the term of their contract. Our failure to retain and identify fighters could
affect our event attendance and TV viewership and therefore, our results of operations.
It is difficult
to generate and maintain audience’s interest in our fighters
.
Part of our business
is to the creation of storylines based on fighters’ background. We cannot guarantee that we can always create appealing storylines
for the fighters to capture MMA fans’ interest in attending our events or watching them on television. This could lead to
a lack of viewership and may adversely affect our results of operations.
We may become
subject to new legislation or regulations governing MMA fighting.
While the mixed
martial arts sector is currently regulated by the Singapore or PRC governments, hosting MMA events requires certain permits and
licenses. In addition, MMA continues to draw attention of governments which may result in new legislation and rules. We cannot
make any assurances that we will be able to comply with new legislation or rules or that such compliance would not be too expensive
for us. Failure to comply may lead to a total stop of our operations and prohibit us from continuing our business.
We may not
be able to secure contracts with video streaming sites for our Pay-per-view business.
Part of our growth
strategy is to start delivering our shows by streaming them through Pay-Per-View (“PPV”) channels and over the internet.
There can be no assurance that we will secure licensing contracts with PPV providers or televisions stations that offer PPV. Our
inability to secure PPV would negatively impact our growth prospects and result of operations.
We may not
be able to secure event venues
.
We cannot provide
any assurance that we will be able to book event venues at ideal locations to attract audiences to patronize to our events. Our
ability to book venues is subject to other events in the area and the price we can afford to pay. This could adversely affect our
event hosting abilities and thus our ability to generate revenues and operate our business.
We may encounter
media censorship in overseas markets.
Our content may
be censored in countries such as China due to the inherent violence involved in MMA fighting. Such censorship would not allow us
to televise events or sell PPV viewings and may adversely affect our results of operations. In addition, changes in the policies
of the Chinese government, for instance, could have a significant impact on our business. We may also be prohibited from promoting
or conducting our live fighting events in the country. The inability to do so over an extended period of time could adversely affect
our profitability and results of operations.
We may not
be able to secure sufficient sponsorship.
Sponsorship is
essential to our revenue and business model. We usually obtain sufficient sponsorship prior to organizing a live event. However,
we cannot make any assurance that we will be able secure adequate sponsorship for each of our events. Ticket and PPV sales are
only parts of our revenue model and sponsorships are critical to making an event profitable. Our inability to secure sufficient
sponsorships for each event could adversely affect our results of operations.
We may not
be able to secure television stations to broadcast our shows.
In addition to
hosting live events, part of our intended revenue stream is to come from TV distribution. However, we cannot guarantee that we
will be able to find TV channels to broadcast our events. Our ability to secure the airtime of our events on TV is affected by
various factors, among other things, whether a TV station requires payment from the Company for the broadcasting, whether there
is an available slot for the Company’s event and whether there is any censorship on events with violent content. In addition,
if no TV station is willing to broadcast our events, our events and our brand will not have sufficient publicity in the media;
therefore, it may negatively impact the sale of our future events. Thus, the failure to sell the rights to broadcast our events
to TV stations would adversely affect our performance and growth.
We depend
on the services of key executives, the loss of whom could materially harm our business and our strategic direction.
Our future success
significantly depends on the continued service and performance of our key management personnel. Our growth direction is largely
dependent on Mr. Aan Yee Leong Justin and Mr. Khian Kiee Leong. The loss of the services by Messrs. Aan Yee Leong and Khian Kiee
Leong due to unexpected reasons could have a material adverse effect on our ability to create creative and enticing shows which
could adversely affect our operating results and market our events as well as our business prospects. We cannot assure that Messrs.
Leong and Leong’s services will continue to be available to us. We depend on the services of these key executives, the loss
of whom could materially harm our business and our strategic direction.
We may face
disruptions of the systems and equipment utilized in our live events.
We rely largely
on outside contractors to supply us with the sound and lighting equipment for our live events. Although the Company inspects such
equipment upon delivery from the contractors prior to an event, we cannot guarantee if such equipment may function without disruptions
in the live event. In the event the provided equipment or system malfunctions at a live event, it will result in disruption of
the progression of our event and may have a negative impact on the Company’s reputation. This would also affect our ability
to retain audience and would affect our future events in the MMA market.
We may face
pressure from parental, government, or other groups to stop our operations.
Our live events
are considered violent and usually rated as Parental Guidance required. Due to the inherent violence involved in MMA, we may face
pressure from nonprofit organizations or parental groups to prohibit events to be held, marketed or broadcast in countries which
we currently operate in or plan to expand to. This could negatively impact our ability to market our brand, reduce the number of
sponsorships that we may obtain and adversely affect our revenue from live event ticket sales and TV broadcasting.
Our expansion
into new markets may present increased risks due to our unfamiliarity with the local markets.
We intend to expand
our business further into China where we have little experience. This market may have different cultures, competitive conditions,
consumer tastes and discretionary spending patterns than our existing market, which may cause our expansion to be less successful
than our Singapore business. In addition, our advertising program may not be successful in generating brand awareness in China,
and the lack of market awareness of the brand of Rebel Fighting Championship can pose an additional risk in expanding into new
markets.
Our quarterly
results of operations are subject to fluctuations due to the timing of our event hosting.
The timing of
our events may result in significant fluctuations in our quarterly performance. We typically incur most cash costs for an event
within the third month immediately preceding, and the month of the event. Due to these substantial up-front financial requirements
to recruit fighters, rent venues, advertise as well as other costs to prepare for the events, the quarterly results of our financials
may incur significant expense and vary from quarter to quarter.
We may not
be able to maintain profitability.
Maintaining profitability
depends upon numerous factors, including our ability to generate increased revenues and our ability to control expenses. We may
incur significant losses in the future for a number of reasons, including the other risks described in this filing and our ongoing
depreciation and amortization expense, and we may encounter unforeseen expenses, difficulties, complications, delays and other
unknown events. Accordingly, we can make no assurances that we will be able to achieve, sustain or increase profitability in the
future.
We may not
be able to obtain and maintain licenses and permits necessary for our operation, in compliance with laws, regulations and other
requirements, which could adversely affect our business, results of operations or financial condition.
We are subject
to various laws and regulations in the countries we operate that will be affecting our business. If we fail to comply with such
laws and regulations, we may be subject to various sanctions and/or penalties and fines or may be required to cease operations
until we achieve compliance, which could have an adverse effect on our business and our financial results.
Customer
complaints or litigation on behalf of our customers may adversely affect our business, results of operations or financial condition.
Our business may
be adversely affected by legal or governmental proceedings brought by or on behalf of our customers. In recent years, some combat
sports companies have been subject to lawsuits, including class action lawsuits, alleging violations of law regarding the brutal
nature of the fights. We are also subject to a variety of other claims in the ordinary course of business, including injury of
the fighters. These legal proceedings may adversely affect our operation results and profitability.
We have
a limited history of operating as a promoter for MMA events.
We are a development
stage company formed in the last 5 years, to carry out the MMA events and thus have a limited operating history. We started our
business in June of 2013 and to date we have only held six MMA events total in Singapore and China. Thus, we have limited experience
in promoting the MMA events. We expect that our results of operations may also fluctuate significantly in the future as a result
of a variety of market factors, including, among others, the dominance of other companies which has long-term history and experience
in the area of MMA, the entry of new competitors into the MMA business, our ability to attract, retain and motivate qualified personnel,
the initiation, renewal or expiration of our customer base, pricing changes by the company or its competitors, specific economic
conditions in the MMA business and general economic conditions. Accordingly, our future revenue and operating results are difficult
to forecast.
There are
established competitors in the MMA market. The Company may not be able to survive the fierce competition.
The industry is
competitive and highly fragmented, with established brand awareness of our competitors such as Ultimate Fighting Championship and
One Fighting Championship. We compete with these well-known companies as well as other MMA organizations which may affect our ability
to thrive in the MMA industry. Many of our current and potential competitors have longer operating histories, larger customer bases,
greater brand recognition and significantly greater financial, marketing, technical, management and other resources than we do.
We expect that competition will be intensified in the future as the MMA sports continue to grow worldwide. Increased competition
may result in reduced operating margins, reduced profitability, loss of market share and diminished brand recognition.
Failure
of us to adequately protect our intellectual property could injure the value of our brand.
Our business is
dependent on successful marketing and promotion of our branded events, therefore protecting our brand from intellectual property
infringement (such as counterfeiting our branded products and other unauthorized uses of our trademark) is important. Although
we will enforce our intellectual property rights, it may not be possible for us to detect all instances of brand infringement.
Additionally, where instances of brand infringement are detected, we cannot guarantee that such instances will be prevented as
there may be legal or factual circumstances that give rise to uncertainty as to the validity, scope and enforceability of our intellectual
property rights. Infringement of our trademark, copyright and other intellectual property rights by others could have an adverse
effect on our brand and hence affect our income.
Economic
downturns may lead to less disposable income of our potential audience, resulting in smaller audiences of our events. An economic
recession may also result in less sponsorship for our events.
An economic downturn
or adverse conditions in the global markets may negatively affect our earnings. Attendance of our events and purchases for viewing
of our shows may depend in part on the actual or perceived personal disposable income of our potential audiences. Our revenue is
also dependent on marketing budgets of our sponsors. These commercial contract payments are contingent upon the expenditures of
businesses across a wide range of industries, which industries may cut costs in response to any economic downturn.
Risk Factors
Related to Our Common Stock
Our shares of common stock are subject
to penny stock regulation. Because our common stock is penny stock, holders of our common stock may find it difficult or
may be unable to sell their shares.
The SEC has adopted rules that regulate
broker/dealer practices in connection with transactions in penny stocks. Penny stocks generally are equity securities with
a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system,
provided that current price and volume information with respect to transactions in such securities is provided by the exchange
system). The penny stock rules require a broker/dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks
and the nature and level of risks in the penny stock market. The broker/dealer also must provide the customer with bid and
offer quotations for the penny stock, the compensation of the broker/dealer, and its salesperson in the transaction, and monthly
account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny
stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker/dealer must make
a special written determination that a penny stock is a suitable investment for the purchaser and receive the purchaser’s
written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading
activity in any secondary market for a stock that becomes subject to the penny stock rules, and accordingly, holders of our common
stock may find it difficult or may be unable to sell their shares.
Our stock
price may be volatile and you may not be able to resell your shares at or above the price you paid.
In
addition, volatility in the price of our common stock may subject us to securities litigation resulting in substantial costs and
liabilities and diverting management’s attention and resources.
The market price of our common stock is
likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control,
including the following:
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our ability to execute our business plan;
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changes in our industry;
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competitive pricing pressures;
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our ability to obtain working capital financing;
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additions or departures of key personnel;
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limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;
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sales of our common stock;
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operating results that fall below expectations;
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regulatory developments;
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economic and other external factors;
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period-to-period fluctuations in our financial results;
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our inability to develop or acquire new or needed technologies;
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the public’s response to press releases or other public announcements by us or third parties, including filings with the SEC;
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changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;
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the development and sustainability of an active trading market for our common stock; and
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any future sales of our common stock by our officers, directors and significant stockholders.
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FINRA sales practice requirements may also limit a stockholder’s
ability to buy and sell our stock.
In addition to the “penny stock”
rules described above, FINRA has adopted Rule 2111 that requires a broker-dealer to have reasonable grounds for believing that
an investment is suitable for a customer before recommending the investment. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s
financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes
that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The
FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may
limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Because we are a small company with
a limited operating history, stockholders may find it difficult to sell their common stock in the public markets.
Our common stock is currently traded on
the OTC Markets OTCQB under the symbol “REBL.” The number of persons interested in purchasing our common stock
at or near bid prices at any given time may be relatively small. This situation is attributable to a number of factors, including
the fact that we are a small company which is still relatively unknown to stock analysts, stock brokers, institutional investors,
and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend
the purchase of our common stock until such time as we became more viable. Additionally, many brokerage firms may not be
willing to effect transactions in our securities. As a consequence, there may be periods of several days or more when trading
activity in our common stock is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of
trading activity that will generally support continuous sales without an adverse effect on the stock price. We cannot give
you any assurance that an active public trading market for our common stock will develop or be sustained, or that trading levels
will be sustained.
Future issuances of our preferred stock could dilute the
voting and other rights of holders of our common stock.
Our board of directors has the authority
to issue shares of preferred stock in any series and may establish, from time to time, various designations, powers, preferences
and rights of the shares of each such series of preferred stock. Any issuances of preferred stock may have priority over
the common stock with respect to dividend or liquidation rights. Any future issuance of preferred stock may have the effect
of delaying, deferring or preventing a change in control of our company and may adversely affect the voting and other rights of
the holders of our common stock.
If we are unable to comply with the
financial reporting requirements mandated by the SEC’s regulations, investors may lose confidence in our financial reporting
and the price of our common stock could decline.
If we fail to maintain effective internal
controls over financial reporting, our ability to produce timely, accurate and reliable periodic financial statements could be
impaired. If we do not maintain adequate internal control over financial reporting, investors could lose confidence in the
accuracy of our periodic reports filed under the Exchange Act. Additionally, our ability to obtain additional financing could
be impaired or a lack of investor confidence in the reliability and accuracy of our public reporting could cause our stock price
to decline.
Our directors, executive officers
and controlling persons as a group have significant voting power and may take actions that may not be in the best interest of shareholders.
Our directors, executive officers and controlling
persons as a group beneficially own approximately 35.5% of our Common Stock. They will have the ability to exert substantial
influence over all matters requiring approval by our stockholders, including the election and removal of directors and any proposed
merger, consolidation or sale of all or substantially all of our assets. In addition, they could dictate the management of our
business and affairs. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control,
or impeding a merger or consolidation, takeover or other business combination that could be favorable to stockholders. This significant
concentration of share ownership may also adversely affect the trading price for our Common Stock because investors may perceive
disadvantages in owning stock in a company with controlling affiliated stockholders.
We expect that our revenue will fluctuate,
which could cause our stock price to decline.
Any significant decline on selling our
tickets to the events, unfavorable TV distribution deals that we enter into, or changes in the spending behavior of our customers
could adversely affect our revenue growth. If our revenue fluctuates or does not meet the expectations of securities analysts and
investors, our stock price would likely decline.
If securities or industry analysts
do not publish research or reports about our business, if they adversely change their recommendations regarding our common stock,
or if our operating results do not meet their expectations, our stock price and trading volume could decline.
The trading market for our common stock
will be influenced by the research and reports that securities or industry analysts publish about us or our business. We do not
have any control over these reports or analysts. If any of the analysts who cover our company downgrades our stock, or if our operating
results do not meet the analysts’ expectations, our stock price could decline. Moreover, if any of these analysts ceases
coverage of our company or fails to publish regular reports on our business, we could lose visibility in the financial markets,
which in turn could cause our stock price and trading volume to decline.
Risks Related to our Business
Uncertainty in the interpretation and
application of the 2017 Tax Cuts and Job Act could materially affect our tax obligations.
Significant judgment is required in determining
our provision for income taxes. In the course of our business, there may be transactions and calculations where the ultimate
tax determination is uncertain. For example, compliance with the 2017 United States Tax Cut and Jobs Act (“TCJA”)
may require the collection of information not regularly produced within the Company, the use of estimates in our consolidated financial
statements, and the exercise of significant judgment in accounting for its provisions. As regulations and guidance evolve
with respect to TCJA, and as we gather more information and perform more analysis, our results may differ from previous estimates
and may materially affect our financial position.
We may be audited by tax authorities in
different jurisdictions. Economic and political pressures to increase tax revenue in various jurisdictions may make resolving
tax disputes favorably more difficult. Although we believe our tax estimates are reasonable, the final determination of tax
audits and any related litigation in the jurisdictions where we are subject to taxation could be materially different from our
historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on our
consolidated financial statements in the periods in which that determination is made.
In addition, changes in U.S. federal and
state tax laws applicable to us and changes in taxing jurisdictions’ administrative interpretations, decisions, policies, and positions
may materially adversely impact our tax expense and cash flows.
Risks Related to Doing Business in China
Changes in China’s economic, political
or social conditions or government policies could have a material and adverse effect on our business and operations.
Most of our business operations are conducted
in China. Accordingly, our business, results of operations, financial condition and prospects are affected by economic, political
and social conditions in China generally and by continued economic growth in China as a whole.
China’s economy differs from the
economies of most developed countries in many respects, including the level of government involvement, level of development, growth
rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing
the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment
of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by
the government. In addition, the Chinese government continues to play a significant role in regulating industry development. The
Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling
payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular
industries or companies.
Growth of China’s economy has been
uneven, both geographically and among various sectors of the economy, and the growth of the Chinese economy has slowed down since
2012. Some of the government measures may benefit the overall Chinese economy, but may have a negative effect on us. For example,
our financial condition and results of operations may be adversely affected by government control over capital investments or
changes in tax regulations. Any stimulus measures designed to boost the Chinese economy may contribute to higher inflation, which
could adversely affect our results of operations and financial condition. For example, certain operating costs and expenses, such
as employee compensation and office operating expenses, may increase as a result of higher inflation. Additionally, because a
substantial portion of our assets consists of cash and cash equivalents and short-term investments, high inflation could significantly
reduce the value and purchasing power of these assets.
Uncertainties with respect to the PRC
legal system could adversely affect us.
We conduct our business primarily through
our subsidiaries entities in China which were established in 2017. Our operations in China are governed by PRC laws and regulations.
Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China. The PRC legal system
is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value.
PRC laws and regulations have significantly
enhanced the protections afforded to various forms of foreign investments in China for the past decades. However, China has not
developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic
activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of
published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties.
Furthermore, the PRC legal system is based
in part on government policies and internal rules, some of which are not published on a timely basis or at all. As a result, we
may not be aware of our potential violation of these policies and rules. In addition, any litigation in China may be protracted
and result in substantial costs and diversion of resources and management attention.
Our subsidiaries and consolidated affiliated
entities in China are subject to restrictions on paying dividends and making other payments to our holding company.
Rebel Group, Inc. is our holding company
incorporated in the United States. As a result of the holding company structure, it currently relies on dividend payments from
our subsidiaries in China. However, PRC regulations currently permit payment of dividends only out of accumulated profits, as determined
in accordance with PRC accounting standards and regulations. Our subsidiaries in China are also required to set aside a portion
of their after-tax profits according to PRC accounting standards and regulations to fund certain reserve funds. The PRC government
also imposes controls on the conversion of RMB into foreign currencies and the remittance of foreign currencies out of China. We
may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency. Furthermore,
if our subsidiaries in China incur debt on their own in the future, the instruments governing the debt may restrict their ability
to pay dividends or make other payments. If our subsidiaries in China are unable to pay dividends or make other payments to us,
we may be unable to pay dividends on our common stocks.
Governmental control of currency conversion
may affect the value of your investment.
The PRC government imposes controls on
the convertibility of RMB into foreign currencies and, in certain cases, the remittance of foreign currency out of China. We receive
most of our revenues in RMB. Under our current structure, our income at the US holding company level will primarily be derived
from dividend payments from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of
our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their
foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including
profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without
prior approval from the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However,
approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out
of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also
at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange
control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay
dividends in foreign currencies to our stockholders.
ITEM 1B. UNRESOLVED STAFF
COMMENTS
Disclosure in response to this item is
not required of a smaller reporting company.
ITEM 2. PROPERTIES
Our headquarters is located in the heart
of downtown Singapore at 7500A Beach Road, Unit 13-313, The Plaza, Singapore. We pay our landlord SGD 3,317.00 (USD $2,480) as
rent per month. We are renting the property on a month to month basis, the Company plans to move to bigger premises. The Company’s
new operation headquarters is located in Shanghai at the Grand Gateway, No. 1 Hongqiao Road, Xuhui District, Shanghai 200030 pursuant
to a lease agreement with a monthly rent of RMB 80,000 (USD $16,400). The lease will expire on December 14, 2020.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved
in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. There
are currently no legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition
or operating results.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
There is limited public trading market
for our Common Stock, which is quoted on the OTC Markets OTCQB under the symbol “REBL.”
The market price of our Common Stock is
subject to significant fluctuations in response to variations in our quarterly operating results, general trends in the market
and other factors, over many of which we have little or no control. In addition, broad market fluctuations, as well as general
economic, business and political conditions, may adversely affect the market for our Common Stock, regardless of our actual or
projected performance. Our common stock did not trade prior to June 18, 2013. Trading in stocks quoted on the OTCQB is often thin
and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s
operations or business prospects. We cannot assure you that there will be a market for our common stock in the future.
OTCQB securities are not listed or traded
on the floor of an organized national or regional stock exchange. Instead, OTCQB securities transactions are conducted through
a telephone and computer network connecting dealers in stocks.
For the periods indicated, the following
table sets forth the high and low bid prices per share of common stock. The following quotations reflect the high and low bids
for our shares of common stock based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.
|
Fiscal Year 2017
|
|
High Bid
|
|
|
Low Bid
|
|
|
First Quarter
|
|
$
|
1.55
|
|
|
$
|
1.55
|
|
|
Second Quarter
|
|
$
|
1.55
|
|
|
$
|
1.55
|
|
|
Third Quarter
|
|
$
|
2.65
|
|
|
$
|
1.55
|
|
|
Fourth Quarter
|
|
$
|
5.00
|
|
|
$
|
2.00
|
|
|
Fiscal Year 2016
|
|
High Bid
|
|
|
Low Bid
|
|
|
First Quarter
|
|
$
|
1.55
|
|
|
$
|
1.01
|
|
|
Second Quarter
|
|
$
|
1.50
|
|
|
$
|
1.11
|
|
|
Third Quarter
|
|
$
|
1.50
|
|
|
$
|
0.61
|
|
|
Fourth Quarter
|
|
$
|
1.61
|
|
|
$
|
1.10
|
|
As of April 13, 2018, the last sale
price reported on the OTCQB for the Company’s Common Stock was approximately $3.70 per share.
Common Stock
Our authorized capital stock consists of
500,000,000 shares of common stock, with a par value of $0.0001 per share, and 100,000,000 shares of preferred stock, par value
$0.0001 per share. Our common stock is entitled to one vote per share on all matters submitted to a vote of the stockholders,
including the election of directors. Except as otherwise required by law or provided in any resolution adopted by our board of
directors with respect to any series of preferred stock, the holders of our common stock will possess all voting power. Generally,
all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality)
of the votes entitled to be cast by all shares of our common stock that are present in person or represented by proxy, subject
to any voting rights granted to holders of any preferred stock. Holders of our common stock representing fifty percent (50%) of
our capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum
at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate
certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation. Our Articles
of Incorporation do not provide for cumulative voting in the election of directors.
Subject to any preferential rights of any
outstanding series of preferred stock created by our board of directors from time to time, the holders of shares of our common
stock will be entitled to such dividends (cash, stock, or otherwise) as may be declared from time to time by our board of directors
from funds available therefore.
Subject to any preferential rights of any
outstanding series of preferred stock created from time to time by our board of directors, upon liquidation, dissolution or winding
up, the holders of shares of our common stock will be entitled to receive pro rata all assets available for distribution to such
holders.
In the event of any merger or consolidation
with or into another company in connection with which shares of our common stock are converted into or exchangeable for shares
of stock, other securities or property (including cash), all holders of our common stock will be entitled to receive the same kind
and amount of shares of stock and other securities and property (including cash). Holders of our common stock have no pre-emptive
rights, no conversion rights and there are no redemption provisions applicable to our common stock.
As of the date of this report, there were
45,653,868 shares of common stock issued and outstanding.
Preferred Stock
The Company’s Board of Directors
is authorized by its Articles of Incorporation to issue Preferred Stock from time to time in one or more series with such designations,
preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions, thereof,
as shall be stated in the resolutions adopted by the Company’s Board of Directors providing for the issuance of the Preferred
Stock. The Company’s Board of Directors is authorized, within any limitations prescribed by law and the Company’s Articles
of Incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares
of any series of Preferred Stock. There is no preferred stock issued or outstanding at the date of this Current Report.
Warrants
There are currently no outstanding warrants.
Options
There are currently no outstanding options.
Holders
As of December 31, 2017, we had 42,797,008
shares of our common stock par value, $.0001, issued and outstanding, as of today’s date this number is 45,653,868. There
were approximately 454 beneficial owners of our common stock as of December 31, 2017.
Transfer Agent and Registrar
The Transfer Agent for our capital stock
is Island Stock Transfer with an address at 15500 Roosevelt Boulevard, Suite 301, Clearwater, Florida 33760. Their telephone number
is Office phone: 727-289-0010.
Penny Stock Regulations
The Securities and Exchange Commission
has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less
than $5.00 per share. Our Common Stock, when and if a trading market develops, may fall within the definition of penny stock and
be subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other
than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding
$200,000 individually, or $300,000, together with their spouse).
For transactions covered by these rules,
the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s
prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny
stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Securities and Exchange
Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer
and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements
must be sent disclosing recent price information for the penny stock held in the account and information on the limited market
in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our Common
Stock and may affect the ability of investors to sell their Common Stock in the secondary market.
In addition to the “penny stock”
rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (“FINRA”)
has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status,
investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability
that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult
for broker-dealers to recommend that their customers buy our common stock, which may limit the investors’ ability to buy
and sell our stock.
Dividend Policy
We have not paid any cash dividends to
our shareholders. Any future determination as to the declaration and payment of dividends on shares of our Common Stock will be
made at the discretion of our board of directors out of funds legally available for such purpose. We are under no contractual obligations
or restrictions to declare or pay dividends on our shares of Common Stock. In addition, although we currently have no plans to
pay any cash dividends, as discussed above, the Company is in the process of preparing and approving a revised Plan of Disposition
with regard to the 3,891,000 shares of MOXC which are currently held by the Company, pursuant to which the Company plans to distribute,
as a dividend, the MOXC shares to the Company’s shareholders as of January 29, 2015, on a pro-rata basis, that would have
been entitled to share in the proceeds of the sale of the MOXC shares by the Company under the original Plan of Disposition, if
the Company had consummated such sale.
Equity Compensation Plan Information
Currently, there is no equity compensation plan in place for
the Company.
Unregistered Sales of Equity Securities
During January to
March 2017, the Company issued 531,430 shares of its Common Stock for aggregate cash proceeds totaling $265,715, pursuant to subscription
agreements entered into with investors.
In May 2017, the
Company issued 2,079,000 shares of its Common Stock for aggregate cash proceeds totaling $1,039,500, pursuant to subscription
agreements entered into with investors. On May 3, 2017, the Company issued 70,000 shares of its Common Stock to Mr. Chow Hong
Ong as payment for his services in the capacity of a director of the Company. On May 3, 2017, the Company issued 40,000 shares
of its Common Stock to a service provider as payment for his sponsorship services that he provided to the Company.
In June 2017, the
Company issued 997,000 shares of its Common Stock for aggregate cash proceeds totaling $549,500, pursuant to subscription agreements
entered into with investors. On June 8, 2017, the Company issued 80,000 shares of its Common Stock as a professional fee to a
service provider as payment for his services in securing fighters in China for Pure Heart for the Company’s events. On June
8, 2017, the Company issued 100,000 shares of its Common Stock as a professional fee to a service provider as payment for his
services pursuant to a contract for services agreement dated May 12, 2017, between such service provider and Pure Heart.
During July to September 2017, the Company issued 3,503,460 shares
of its Common Stock, of which (i) 1,895,460 shares were for services and placement fees in lieu of cash valued at $947,730 in
an aggregate and (ii) 1,608,000 shares were sold to investors for gross proceeds totaling $804,000.
On October
1, 2017, as part of a Share Transfer Agreement between the Company, Pure Heart and Naixin Qi, an individual (the “Shareholder”),
the sole shareholder of Qingdao Quanyao Sports Consulting Ltd, a company organized under the laws of PRC (the “Target Company”),
the Company issued 12,000,000 shares of the Common Stock of the Company, par value $0.0001 per share.
In October
and December 2017, the Company issued 371,000 shares of its Common Stock for aggregate cash proceeds totaling $361,000, pursuant
to subscription agreements entered into with investors. On October 17, 2017, the Company issued 25,000 shares of its Common Stock
to an employee as payment for his long-term service award.
The above issuances were made pursuant
to the exemption from registration contained in Regulation S promulgated under the Securities Act.
Purchases of Equity Securities by the Registrant and Affiliated
Purchasers
We have not repurchased any shares of our
common stock during the fiscal year ended December 31, 2017.
ITEM 6. SELECTED FINANCIAL DATA
Disclosure in response to this item is not required of a smaller
reporting company.
ITEM 7. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Current Report on Form 10-K contains
forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations,
beliefs, intentions or strategies for the future, which we indicate by words or phrases such as “anticipate,” “expect,”
“intend,” “plan,” “will,” “we believe,” “management believes” and similar
language. Except for the historical information contained herein, the matters discussed in this “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Current Report are forward-looking
statements that involve risks and uncertainties. The cautionary language in this Current Report, provide examples of risks, uncertainties
and events that may cause our actual results to differ materially from those projected. Except as may be required by law, we undertake
no obligation to update any forward-looking statement to reflect events after the date of this Current Report on Form 10-K.
The “Company”, “we,”
“us,” and “our,” in this Management’s Discussion and Analysis of Financial Condition and Plan of Operation
refer to the combined business of (i) Rebel FC;(ii) Pure Heart; (iii) SCA Capital; (iv) Rebel Shanghai; and (v) Quanyao
Overview
The Company, through its subsidiaries,
organizes promotes and hosts MMA events featuring top level athletic talent and delivering top quality events centered around Chinese
fighters and fans. With assistance from contracted production crews, the Company produces and distributes, through the internet
and social media, and sells the rights to distribute to television stations, videos of its MMA events.
The Company seeks to promote MMA in China
through hosting top quality matches, live TV broadcast and inspiring reality series that attract talented fighters from all over
the world. MMA is unarmed combat involving the use of a combination of techniques from different disciplines of martial arts, including,
without limitation, grappling, submission holds, kicking and striking. The styles of martial arts range from Brazilian Jiu-Jitsu,
Judo, Karate, Boxing, Muay Thai, Wrestling, Jeet Kune Do, Taekwondo, Sanshou and various other forms of martial arts. Unlike boxing,
where athletes can only strike with their fists and only above the belt, the fighters in MMA can use punches, kicks, elbows, knee
strikes, takedowns and submissions to win a contest.
The Company successfully held two events
in 2017. On August 12, 2017, an event titled
Battle Royal: Quest for Glory
was held at Kerry Hotel in Pudong, Shanghai together
with Quanyao. On September 2, 2017, the Company held another event titled
China vs. The World
at Shenzhen Stadium in Shenzhen
together with Quanyao. This event was broadcast live on Qingdao TV and several major social media platforms. For the two events
in year 2017, Quanyao paid Pure Heart USD200,000 per event for royalty and management fee in accordance with 2017 Cooperation Agreement.
The Company plans to hold eight events
in in 2018 with two in Shanghai, two in Guangzhou, two in Shenzhen and two in Beijing. The first event in 2018 which will be held
on April 29, 2018 again at Kerry Hotel in Shanghai. Events in 2018 will be broadcast live by Guangdong Sports TV, and other satellite
TV stations where negotiations are ongoing and major social media platforms. However, there can be no assurance that such events
will occur, or even if they do occur there can be no guarantee that such events will be successful or profitable.
As of December 31, 2017, our retained earnings
were $5,283,484. Our stockholders’ equity was $16,945,079.
Results of Operations
For the year ended December 31, 2017
compared with the year ended December 31, 2016
Gross Revenues
The Company made sales revenues from operations
of $393,185 in the year ended December 31, 2017 compared to $245,763 being generated in the year ended December 31, 2016.
The Company’s sales revenue of $393,185
in the year ended December 31, 2017 primarily came from fees received by Pure Heart for holding events in China, Battle Royal:
Quest for Glory and China Vs The World, and for our Chinese associate for which we received management fees.
Operating Expenses
Operating expenses for the year ended December
31, 2017 and year ended December 31, 2016 were $2,515,465 and $456,971, respectively. The expenses consisted of filing fees, professional
and consultants’ fees, payroll and benefits and other general expenses.
General and administrative expenses increased
as we incurred additional costs to support the planned growth of our business.
Net Loss
Net loss for the year ended December 31,
2017 was $2,195,366 as compared to $188,195 for year ended December 31, 2016. Basic and diluted net loss per share amounted $0.08
and $0.01 respectively for the year ended December 31, 2017 and year ended December 31, 2016.
The increase of net loss for the year ended
December 31, 2017 compared to the year ended December 31, 2016 was due to increased filing fees, professional fees, payroll and
benefits.
Liquidity and Capital Resources
As of December 31, 2017 we had
working capital deficiency of $1,739,033 consisting of cash on hand of $40,372 as compared to working capital deficiency of $382,642 and cash on hand of $22,321 as of December 31, 2016.
Net cash used in operating activities for
the year ended December 31, 2017 was $3,498,642 as compared to $261,006 for the year ended December 31, 2016. The cash used in
operating activities for the financial year ended December 31, 2017 are mainly for filing fees, professional fees, payroll and
benefits.
Net cash used in investing activities for
the year ended December 31, 2017 was $16,993 as compared to $1,589 for the year ended December 31, 2016. The cash used in investing
activities are mainly due to purchase of fixed assets.
Net cash provided by financing activities
for the year ended December 31, 2017 was $3,484,711 as compared to $229,260 for the year ended December 31, 2016. The cash provided
by financing activities for the year ended December 31, 2017 are mainly from issuing of shares. Our operating results for future
periods are subject to numerous uncertainties and it is uncertain if we will be able to maintain profitability and continue growth
for the foreseeable future. If management is not able to increase revenue and manage operating expenses in line with revenue forecasts,
the Company may not be able to maintain profitability.
We will require additional capital to continue
to operate and expand our business and we are currently raising capital through the sale of equity. Sources of additional capital
through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or revolving
credit facilities. We may not be successful in locating suitable financing transactions in the time period required or at all,
and we may not obtain the capital we require by other means. Our inability to raise additional funds when required may have a negative
impact on our operations, business development and financial results.
On March 16, 2018, the Company
entered into a Subscription Agreement (the “Subscription Agreement”) with Shaw Chai Li Howard, a third party
investor (the “Investor”). The Investor is expected to remit three equal installments in the amount of $1
million each, and $3 million in the aggregate, in exchange for such numbers of the Company’s common stock as determined
pursuant to the terms and conditions of the Subscription Agreement. Pursuant to the Subscription Agreement, all three
installments are expected to be remitted prior to December 31, 2018. The Company also received financial support commitments
from the Company’s major shareholder.
We believe that available cash and cash equivalents, together with actions as mentioned above, should enable
us to meet presently anticipated cash needs for at least the next 12 months after the date that the financial
statements are issued. However, if we are unable to obtain the necessary additional capital on a timely basis and
on acceptable terms, it will be unable to implement its current plans for expansion, repay debt obligations or respond to
competitive pressures. Any of these factors would have a material adverse effect on its business, prospects, financial condition
and results of operations and may raise substantial doubts about our ability to continue as a going concern.
Critical Accounting Policies and
Estimates
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of
the financial statements and the reported amounts of revenue and expenses during the periods. Actual results could differ from
these estimates. Our significant estimates and assumptions include depreciation and the fair value of our stock, stock-based compensation,
debt discount, goodwill and the valuation allowance relating to the Company’s deferred tax assets.
Recently Issued Accounting Pronouncements
Reference is made to the “Recent
Accounting Pronouncements” in Note 2 to the Financial Statements included in this Report for information related to new accounting
pronouncement, none of which had a material impact on our consolidated financial statements, and the future adoption of recently
issued accounting pronouncements, which we do not expect will have a material impact on our consolidated financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2017, we did not have
any off-balance sheet arrangements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Disclosure in response to this item is not required of a smaller
reporting company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company’s consolidated financial statements,
together with the report of the independent registered public accounting firm thereon and the notes thereto, are presented beginning
at page F-1. The Company’s balance sheets as of December 31, 2016 and 2017 and the related statements of operations and comprehensive
loss, changes in stockholders’ equity and cash flows for the year ended 2017 was audited by Friedman LLP (“Friedman”),
an independent registered public accounting firm, while 2016 was audited by Dominic K.F. Chan & Co. (“DKC”), which
as a result of the Merger, as such term is defined in Item 9 of this report, became DCAW (CPA) Ltd (“DCAW”) and DCAW,
succeeded to the registration status with the PCAOB, of DKC, effective from May 1, 2016; DCAW thereafter changed its name to “Centurion
ZD CPA Limited” on November 14, 2016, and therefore Centurion ZD CPA (“Centurion”) is an independent registered
public accounting firm. Both financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America and pursuant to Regulation S-K as promulgated by the Securities and Exchange Commission (the “SEC”)
and are included herein pursuant to Part II, Item 8 of this Form 10-K. The financial statements have been prepared assuming the
Company will continue as a going concern.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
As reported by the Company in its Current
Report on Form 8-K filed with the SEC on February 13, 2018, the Company received a letter from Centurion ZD CPA Ltd. (“CZD”),
a copy of which was filed as Exhibit 16.1 to the Form 8-K, notifying the Company that as of February 10, 2018, CZD would be resigning
as the Company’s independent registered public accounting firm.
On February 10, 2018, the Company entered
into an engagement with Friedman LLP (“Friedman”) to retain Friedman as the Company’s independent public accounting
firm. On February 10, 2018, the board of directors of the Company approved and ratified the engagement of Friedman as its new independent
registered public accounting firm.
CZD’s report on our financial statements
for the fiscal year(s) ended September 30, 2015 and September 30, 2016, did not contain any adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting principles. CZD’s reports on our financial
statements for the fiscal years ended September 30, 2016, and September 30, 2015, however, stated that there was substantial doubt
about the Company’s ability to continue as a going concern.
During the fiscal years ended
December 31, 2016 and 2015, we have had no disagreements with CZD, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of
CZD, would have caused it to make reference to the subject matter of such disagreements in its report on our financial
statements for such periods.
During the fiscal years ended December 31, 2017 and 2016, there have been no reportable events as defined under Item 304(a)(1)(v) of Regulation S-K adopted
by the Securities and Exchange Commission.
Prior to Friedman’s engagement by
the Company, neither the Company, nor anyone on the Company’s behalf, previously consulted with Friedman regarding either (i) the
application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company’s consolidated financial statements or (ii) any matter that was either the subject of a disagreement
as defined in Item 304(a)(1)(iv) of Regulation S-K and its related instructions or a reportable event as defined in Item 304(a)(1)(v)
of Regulation S-K. Further, there was no written report or oral advice provided by the Company or anyone on the Company’s
behalf to Friedman prior to Friedman’s engagement by the Company.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosures Control and Procedures
Our management
is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial
reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed
by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s
board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in
the United States of America and includes those policies and procedures that:
|
|
●
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Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
|
|
●
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
|
|
|
●
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
|
Because of its
inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well
designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there
is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.
However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design
into the process safeguards to reduce, though not eliminate, this risk.
As of December
31, 2017, our CEO evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K. Disclosure controls and procedure
include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management
as appropriate to allow timely decisions regarding required disclosure. Our Management is responsible for monitoring the process
pursuant to which information is gathered and analyze such information to determine the extent to which such information requires
disclosure in the reports filed with the Securities and Exchange Commission. Based on such evaluation, our CEO has concluded that
as of December 31, 2017, the Company’s disclosure controls and procedures were ineffective due to the Company’s lacks
of formal documented controls and procedures applicable to all officers and directors. The Company is in the process of adopting
formal documented controls and anticipates having them in place by December 31, 2018.
As of December
31, 2017, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective
internal control over financial reporting established in by the Committee of Sponsoring Organizations of the Treadway Commission’s
2013 Internal Control - Integrated Framework and SEC guidance on conducting such assessments. Based on that evaluation, they concluded
that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate
application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation
of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be
material weaknesses.
The matters involving
internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company
Accounting Oversight Board were:
(1) lack of a
functioning audit committee due to a lack of a majority of independent members resulting in ineffective oversight in the establishment
and monitoring of required internal controls and procedures;
(2) inadequate
segregation of duties consistent with control objectives;
(3) ineffective
controls over period end financial disclosure and reporting processes; and
(4) do not have
any full-time accounting personnel who have U.S. GAAP experience.
The aforementioned material weaknesses were identified by
our Chief Executive Officer in connection with the review of our financial statements as of December 31, 2017.
Management believes
that the material weaknesses set forth in items (1), (2), (3) and (4) above did not have an effect on our financial results. However,
management believes that the lack of a functioning audit committee results in ineffective oversight in the establishment and monitoring
of required internal controls and procedures, which could result in a material misstatement in our financial statements in future
periods.
Management’s Remediation Initiatives
In an effort to
remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan
to initiate, the following series of measures:
We plan to appoint
one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning
audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures
such as reviewing and approving estimates and assumptions made by management when funds are available to us.
Management believes that the appointment of one or more outside
directors, who shall be appointed to a fully functioning audit committee, may remedy the lack of a functioning audit committee
and a lack of a majority of outside directors on our Board.
We anticipate
that these initiatives may be at least partially, if not fully, implemented by September 2018. Additionally, we plan to test our updated
controls and remediate our deficiencies by September 2018.
Changes in internal controls over
financial reporting
As reported on the
Form 8-K filed by the Company on May 12, 2017, the Company added Chee Keong Teng to its Board of Directors.
Other than the
foregoing, there was no change in our internal controls over financial reporting that occurred during the period covered by this
report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
This annual report does not include an
attestation report of the Company’s registered independent public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the Company’s registered independent public
accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s
report in this Annual Report on Form 10-K.
ITEM 9B. OTHER INFORMATION
None.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
1.
|
Organization and
nature of operations
|
Rebel
Group, Inc. (f/k/a Inception Technology Group, Inc. and utilizes the trade name of Rebel Fighting Championship, the
“Company”) was incorporated under the laws of the State of Florida on September 13, 2011. The Company organizes,
promotes and hosts mixed martial arts (“MMA”) events featuring top level athletic talent. With assistance from
contracted production crews, the Company also produces and distributes, through the internet and social media, and sells the
rights to distribute to television stations, videos of its MMA events. The Company seeks to promote MMA in Asian countries
through hosting events that attract talented fighters from all over the world.
On
January 30, 2015, we completed the acquisition of Rebel Holdings Limited (“Rebel FC”) pursuant to a Share Exchange
Agreement. (“Share Exchange Agreement,” such transaction, the “Share Exchange Transaction”), whereby the
Company issued to the Rebel FC Stockholder an aggregate of 20,700,000 shares of its Common Stock, in exchange for 100% of the
equity interests of Rebel FC held by the Rebel FC Stockholder. The shares of our Common Stock received by the Rebel FC Stockholder
in the Share Exchange Transaction constitute approximately 90% of our issued and outstanding Common Stock giving effect to the
issuance of shares pursuant to the Share Exchange Agreement. As a result of the Share Exchange Transaction, Rebel FC, together
with its subsidiaries, Pure Heart Entertainment Pte Ltd. (“Pure Heart”) and SCA Capital Limited (“SCA Capital”),
became the Company’s wholly-owned subsidiaries. The acquisition was accounted for as a reverse merger and recapitalization
effected by the Share Exchange Transaction. Rebel FC is considered the acquirer for accounting and financial reporting purposes.
The assets and liabilities of the acquired entity have been brought forward at their historical value and no goodwill has been
recognized.
The
exchange transaction was accounted for as a reverse acquisition in accordance with generally accepted accounting principles of
America. For financial reporting purposes, this transaction is classified as a recapitalization of the Company and Pure Heart.
The accompanying audited consolidated financial statements were retroactively adjusted to reflect the effects of the recapitalization
of the financial statements of the Company and the historical financial statements of Pure Heart.
Also
on January 30, 2015, we transferred 100% equity interests of Moxian Intellectual Property Limited (“Moxian IP), our subsidiary,
to Moxian, Inc. (“MOXC”) pursuant to the Equity Transfer Agreement. As a result of the Equity Transfer Transaction,
Moxian IP ceased to be a subsidiary of the Company.
Rebel
FC, which utilizes the trade name of Rebel Fighting Championship, was incorporated on October 28, 2014 in British Virgin Islands
and engages in hosting and promoting MMA events since its corporation.
Pure
Heart was incorporated under the laws of the Singapore on August 24, 2000 under the name “Soo Kee Coffeeshop Pte. Ltd.”
Effective on November 27, 2002, it changed its name to “Asia Pacific Export International Pte Ltd.” It later changed
its name from “Asia Pacific Export International Pte Ltd.” to “Pure Heart Entertainment Pte Ltd.” on June
7, 2013. As of October 30, 2014, it became a wholly owned subsidiary of Rebel FC. Pure Heart is an operating subsidiary of the
Company and is dedicated to hosting and promoting MMA events.
SCA
Capital, a British Virgin Islands company, was incorporated on January 7, 2011 and holds the intellectual property rights relating
to the Rebel FC business. On October 28, 2014, SCA Capital became the wholly-owned subsidiary of Rebel FC.
On
June 21, 2017, Pure Heart formed Rebel Shanghai Limited, which was incorporated in Shanghai China in order to acquire Qingdao
Quanyao Sports Consulting Co. Ltd. and the business expansion in the southern part of PRC.
On
October 1, 2017, the Company entered into a Share Transfer Agreement (the “Share Transfer”) with Naixin Qi, an individual
(the “Shareholder”), the sole shareholder of Qingdao Quanyao Sports Consulting Co. Ltd, a company organized under
the laws of PRC (the “Qingdao Quanyao”).
Pursuant
to the Transfer Agreement, Pure Heart, through a wholly foreign owned entity (the “WOFE”) agreed to acquire 100% share
of the outstanding equity interests (the “Equity Stake”) of the Qingdao Quanyao from the Shareholder with the purchase
price valued at approximately $7,000,000 consisting of the following: (i) the forgiveness of debt owed by the Target Company to
Pure Heart as of October 1, 2017, in the amount of approximately $2,825,000 (the “Forgiven Debts”) and (ii) 12,000,000
shares (the “Shares”) of the common stock of the Company, par value $0.0001 per share (the “Common Stock”)
(together the “Purchase Price”) (See Note 3 to the consolidated financial statements for detail).
Qingdao
Quanyao holds 50% shares of Qingdao Leibo Sports Culture Co Ltd since January 8, 2015 (date of incorporation).
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
2.
|
Summary of principal
accounting policies
|
Basis
of presentation and consolidation
The
consolidated financial statements of the Company and its subsidiaries are prepared and presented in accordance with accounting
principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the
U.S. Securities and Exchange Commission (“SEC”).
All
significant inter-company transactions and balances have been eliminated upon consolidation.
The
Company’s audited consolidated financial statements have been presented on the basis that it is a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business. The fiscal year end is December
31.
Liquidity
and capital resource
As
of December 31, 2017, the Company had cash and cash equivalents of $40,372, decreased $18,051, when comparing with $22,321 as
of December 31, 2016. The net cash used in operating activities for the year ended December 31, 2017 was $3,498,642, decreased
about $3,237,636 when comparing with $261,006 for the year ended December 31, 2016. The net decrease in cash and cash equivalents
was mainly result from cash used for the operation. The Company’s principal sources of liquidity have been cash provided
by advances from shareholders. The Company’s operating results for future periods are subject to numerous uncertainties
and it is uncertain if the Company will be able to maintain profitability and continue growth for the foreseeable future. If management
is not able to increase revenue and manage operating expenses in line with revenue forecasts, the Company may not be able to maintain
profitability.
The
Company will focus on improving operation efficiency and cost reduction, developing core cash-generating business. Actions include
extent the advances from the major shareholders, seeking additional public and/or private issuance of securities, as well as look
for strategic business partners to optimize our operations. On March 16, 2018, the Company entered into a Subscription Agreement
(the “Subscription Agreement”) with Shaw Chai Li Howard, a third party investor (the “Investor”). The
Investor is expected to remit three equal instalments in the amount of $1 million each, and $3 million in the aggregate, in exchange
for such numbers of the Company’s common stock as determined pursuant to the terms and conditions of the Subscription Agreement.
Pursuant to the Subscription Agreement, all three instalments are expected to be remitted prior to December 31, 2018. The Company
also received financial support commitments from the Company’s major shareholder.
The
Company believes that available cash and cash equivalents, together with actions as mentioned above, should enable the Company
to meet presently anticipated cash needs for at least the next 12 months after the date that the financial statements are issued.
However, if the Company is unable to obtain the necessary additional capital on a timely basis and on acceptable terms, it will
be unable to implement its current plans for expansion, repay debt obligations or respond to competitive pressures. Any of these
factors would have a material adverse effect on its business, prospects, financial condition and results of operations and raise
substantial doubts about the ability of the Company to continue as a going concern. The consolidated financial statements for
the years ended December 31, 2017 and 2016 have been prepared on a going concern basis and do not include any adjustments to reflect
the possible future effects on the recoverability and classifications of assets or the amounts and classifications of liabilities
that may result from the inability of the Company to continue as a going concern.
Revenue
recognition
Revenue
is recognized when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price
is fixed or determinable; and collectability is reasonably assured.
Use
of estimates
The
preparation of the combined financial statements in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the combined financial statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash
and cash equivalents
Cash
and cash equivalents consist of bank deposits with original maturities of three months or less, which are unrestricted as to withdrawal
and use the Company maintained accounts at banks and have not experienced any losses from such concentrations.
.
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
2.
|
Summary
of principal accounting policies
(continued)
|
Fair
value of financial instruments
Fair
value information of financial instruments requires disclosure, whether or not recognized in the balance sheets, for which it
is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Certain
financial instruments and all nonfinancial assets and liabilities are excluded from fair value disclosure requirements. Accordingly,
the aggregate fair value amounts do not represent the underlying value of the Company.
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial
instruments.
Level
3 inputs to the valuation methodology are unobservable and significant to the fair value.
As
of December 31, 2017 and 2016, financial instruments of the Company primarily comprise of cash, other receivable, accrued expenses
and long-term investment, which the carrying amounts approximated their fair values because of their generally short maturities.
Foreign
currency translation and transactions
The
reporting currency of the Company is United States Dollars (“US$”), which is also the Company’s functional currency.
The Singapore and PRC subsidiaries maintain their books and records in its local currency, the Singapore dollar (“SGD”)
and Renminbi dollar (“RMB”), which are their functional currencies as being the primary currency of the economic environment
in which these entities operate.
Transactions
in foreign currencies other than functional currencies are initially recorded at the functional currency rate ruling at the date
of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss
on foreign currency transaction in the statements of income. Monetary assets and liabilities denominated in foreign currency are
translated at the functional currency rate of exchange ruling at the balance sheet date. Any differences are taken to profit or
loss as a gain or loss on foreign currency translation in the statements of income.
The
Company translated the assets and liabilities into US dollars using the rate of exchange prevailing at the applicable balance
sheet date and the statements of income and cash flows are translated at an average rate during the reporting period. Adjustments
resulting from the translation are recorded in investors’ equity as part of accumulated other comprehensive income.
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
2.
|
Summary
of principal accounting policies
(continued)
|
Income
taxes
Deferred
tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the combined
financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end
based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable
income (refer to the header “Tax Cuts and Jobs Act” in Note 12 to the consolidated financial statements for further
discussion on the impact to the enacted tax laws in 2017). Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.
Entities
should recognize in the audited consolidated financial statements the impact of a tax position, if that position is more likely
than not of being sustained upon examination, based on the technical merits of the position. Recognized income tax positions are
measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected
in the period in which the change in judgment occurs. The Company has elected to classify interest and penalties related to unrecognized
tax benefits, if and when required, as part of income tax expense in the statements of operations.
In
January 2018, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs
Act (“SAB 118”) to provide guidance for companies that have not completed their accounting for the income tax effects
of the 2017 Tax Act in the period of enactment. Specifically, SAB 118 states that companies that have not completed accounting
for the effects of the 2017 Tax Act by financial reporting deadlines may report provisional amounts based on reasonable estimates
for items for which the accounting is incomplete. Those provisional amounts will be subject to adjustment during a measurement
period that begins in the reporting period that includes the 2017 Tax Act’s enactment date and ends when a company has obtained,
prepared and analyzed the information needed to complete the accounting requirements under ASC 740 Income Taxes. The measurement
period should not extend beyond one year from the enactment date. Furthermore, SAB 118 states that if a company cannot make a
reasonable estimate for an income tax effect, it should not account for that effect until it can make such an estimate.
In accordance with SAB 118, the Company
has recorded approximately $991,000 of deferred tax liability in connection with the re-measurement of certain unrealized gain
from available-for- sale securities. Any subsequent adjustment to these amounts will be recorded to current tax expense in the
period when the available-for- sale securities were disposed.
The Company has determined that we cannot
make a reasonable estimate of the income tax effect with respect to global intangible low-taxed income (GILTI) provisions of the
2017 Tax Act. The GILTI provisions allow companies to make an accounting policy election to either (i) account for GILTI as a component
of tax expense in the period in which the entity is subject to the rules or (ii) account for GILTI in the entity’s measurement
of deferred taxes. Our ultimate accounting policy election will depend on our estimates of future taxable income related to GILTI.
Refer to the Note 12 – “Income Taxes” for further discussion on the impact of tax laws enacted during 2017.
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
2.
|
Summary
of principal accounting policies
(continued)
|
Earnings
(loss) per share
Basic
earnings (loss) per share is based on the weighted average number of common shares outstanding during the period while the effects
of potential common shares outstanding during the period are included in diluted earnings per share. The average market
price during the year is used to compute equivalent shares.
Employee
equity share options, non-vested shares and similar equity instruments granted to employees are treated as potential common
shares in computing diluted earnings per share. Diluted earnings per share should be based on the actual number of options or
shares granted and not yet forfeited, unless doing so would be anti-dilutive. The Company uses the “treasury
stock” method for equity instruments granted in share-based payment transactions.
Plant
and equipment
Plant
and equipment are recorded at cost. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance
and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful
lives as follows:
Equipment 3
- 5 years
Intangible
assets
Intangible
assets, comprising trade mark and other intangible assets, which are separable from the fixed assets, are stated at cost less
accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of 10 years.
Goodwill
Goodwill
represents the excess of the consideration over the fair value of the net assets acquired at the date of acquisition. Goodwill
is not amortized but rather tested for impairment at least annually at the reporting until level by applying a fair-value based
test in accordance with accounting and disclosure requirements for goodwill and other indefinite-lived intangible assets. This
test is performed by management annually or more frequently if the Company believes impairment indicators are present.
Impairment
of long-lived assets
The
Company reviews its long-lived assets, other than goodwill, including property and equipment and intangible assets with definite
lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be
recoverable. When these events occur, the Company measures impairment by comparing the carrying values of the long-lived assets
to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition.
If the sum of the expected undiscounted cash flows is less than the carrying amounts of the assets, the Company would recognize
an impairment loss based on the excess of the carrying value over the assessed discounted cash flow amount.
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
2.
|
Summary
of principal accounting policies
(continued)
|
Impairment
of goodwill
The
Company reviews the carrying value of intangible assets with indefinite lives not subject to amortization, including goodwill,
to determine whether impairment may exist annually or more frequently if events and circumstances indicate that it is more likely
than not that an impairment has occurred. The Company has the option to assess qualitative factors to determine whether it is
necessary to perform the two-step assessment. If the Company believes, as a result of the qualitative assessment, that it is more
likely than not that the fair value of the reporting unit is less than its carrying amount, the two-step quantities impairment
test described below is required. The first step compares the fair values of each reporting unit to its carrying amount, including
goodwill. If the fair value of each reporting unit exceeds its carrying amount, the assets are not considered to be impaired and
the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares
the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill
is determined in a manner similar to accounting for a business acquisition with the allocation of the assessed fair value determined
in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over
the amounts assigned to the assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized for
any excess in the carrying value of goodwill over the implied fair value of goodwill. Estimating fair value is performed by utilizing
various valuation techniques, with the primary technique being a discounted cash flow.
Long-term
investment
Investments
comprise marketable securities which are classified as available-for-sale securities and are carried at fair value with unrealized
gains and losses, net of taxes, reported as a separate component of shareholders’ equity (deficit). The Company determines
any realized gains or losses on the sale of marketable securities on a specific identification method and records such gains and
losses as a component of other income (expense), net in the consolidated statement of income.
Comprehensive
income (loss)
The
Company has adopted FASB Accounting Standard Codification Topic 220 (“ASC 220”) “Comprehensive income”
(formerly known as SFAS No. 130, “Reporting Comprehensive Income”), which establishes standards for reporting and
the presentation of comprehensive income (loss), its components and accumulated balances. Accumulated other comprehensive income
represents the unrealized fair value (loss) gain on long-term investment and the accumulated balance of foreign currency translation
adjustments of the Company.
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
2.
|
Summary
of principal accounting policies
(continued)
|
Concentrations
and risks
- Foreign
currency risk
A
majority of the Company’s expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’
assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign
exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by
the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be
processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in
order to affect the remittance.
Our
functional currency is the RMB and Singapore dollars in subsidiaries in China and Singapore, respectively, and our financial statements
are presented in U.S. dollars. The Singapore dollars depreciated by 7.6% in fiscal year 2017. It is difficult to predict how market
forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. The change
in the value of the RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without
giving effect to any underlying changes in our business or results of operations. Currently, our assets, liabilities, revenues
and costs are denominated in RMB.
To
the extent that the Company needs to convert U.S. dollars into RMB for capital expenditures and working capital and other business
purposes, appreciation of RMB against U.S. dollar would have an adverse effect on the RMB amount the Company would receive from
the conversion. Conversely, if the Company decides to convert RMB into U.S. dollar for the purpose of making payments for dividends,
strategic acquisition or investments or other business purposes, appreciation of U.S. dollar against RMB would have a negative
effect on the U.S. dollar amount available to the Company.
- Concentration
of credit risk
As
of December 31, 2017 and 2016, the Company had $39,709, and $22,321 of cash and cash equivalents on deposit at financial institutions
in Singapore, respectively.
- Significant
customers
For
the years ended December 31, 2017 and 2016, Qingdao Quanyao and its investment company, Qingdao Leibo Sport Culture Co., Ltd.,
accounted for 99.9% and 99.9% of the Company’s total revenues, respectively. For the year ended December 31, 2016, Leibo
accounted for 26.0% of the Company’s total accounts receivable balance.
*Qingdao
Quanyao was acquired by the Company in October 2017, see details at note 3.
Statement
of Cash Flows
Cash
flows from the Company’s operations are formulated based upon the local currencies. As a result, amounts related to assets
and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances
on the balance sheets.
EBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
2.
|
Summary
of principal accounting policies
(continued)
|
Risks
and Uncertainties
The
significant operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition,
and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general
state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social
conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance
with existing laws and regulations including its organization and structure disclosed in Note 1, may not be indicative of future
results.
Recently
Issued Accounting Guidance
In
May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This
ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance,
and creates guidance for when revenue should be recognized from the exchange of goods or services. ASU No. 2016-08 was issued
in March 2016 to clarify the principal versus agent guidance in this new revenue recognition standard. ASU 2016-10 was issued
in April 2016 to clarify the guidance on accounting for licenses of intellectual property and identifying performance obligations
in the new revenue recognition standard. ASU 2016-12 was issued in May 2016 to clarify the guidance on transition, collectability,
noncash consideration and the presentation of sales and other similar taxes in the new revenue recognition standard. ASU 2016-20
was issued in December 2016 to make technical corrections and improvements on narrow aspects of this guidance. ASU No. 2015-14
was issued in August 2015 to defer the effective date of ASU 2014-09 for one year. The new standard permits adoption either by
using (i) a full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach
with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing
certain additional disclosures. The new standard is effective for annual reporting periods beginning after December 15, 2017,
including interim periods within that reporting period. The Company will adopt the revenue recognition guidance beginning January
1, 2018 using the modified retrospective method of adoption. The Company has determined that the adoption of Topic 606 would not
have a material impact on its consolidated financial statements.
In
January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business”.
The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with
evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. These amendments
take effect for public businesses for fiscal years beginning after December 15, 2017 and interim periods within those periods
assuming the Company will remain an emerging growth company at that date. The Company has not early adopted this update and it
will become effective on July 1, 2018. The Company does not expect that the adoption of this guidance will have a material impact
on its consolidated financial statements.
In
January 2017 the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment.” This new standard eliminates Step 2 from the goodwill impairment test. Instead, an entity should compare
the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying
amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit.
The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years,
which means that it will be effective for us in the first quarter of our fiscal year beginning July 1, 2020 assuming the Company
still remains an emerging growth company at that date. Early adoption is permitted. The Company is currently evaluating the impact
of our pending adoption of ASU 2017-04 on its consolidated financial statements.
In
May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting, to provide guidance to clarify when to account for
a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting
is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes
as a result of the changes in terms or conditions. ASU 2017-09 is effective for all entities for annual periods, and interim periods
within those annual periods, beginning after December 15, 2017 assuming the Company still remains an emerging growth company at
that date. Early adoption is permitted and application is prospective. The Company has not early adopted this update and it will
become effective on July 1, 2018. The Company does not expect that the adoption of this guidance will have a material impact on
its consolidated financial statements.
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
2.
|
Summary
of principal accounting policies
(continued)
|
Recently
Issued Accounting Guidance
(continued)
In
July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480),
and Derivatives and Hedging (Topic 815). The guidance of Part I is to clarify accounting for certain financial instruments with
down round feature in a financial instrument that reduces the strike price of an issued financial instrument if the issuer sells
shares of its stock for an amount less than the currently stated strike price of the issued financial instrument or issues an
equity-linked financial instrument with a strike price below the currently stated strike price of the issued financial instrument.
For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS)
in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as
a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion
options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features.
The amendments also recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending
content in the Codification, to a scope exception. Those amendments do not have an accounting effect. The amendments in Part I
of ASU No. 2017-11 are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning
after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. The amendments
in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect. The
Company has not early adopted this update and it will become effective on July 1, 2020. The Company is currently evaluating the
impact of our pending adoption of ASU 2017-11 on its consolidated financial statements.
In
November 2017, the FASB issued ASU 2017-14, Income Statement-Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic
605), and Revenue from Contracts with Customers (Topic 606). This Accounting Standards Update supersedes various SEC paragraphs
and amends an SEC paragraphs pursuant to the issuance of Staff Accounting Bulletin No. 116 and SEC Release No.33-10403. Management
plans to adopt this ASU during the year ending December 2019. The Company does not believe the adoption of this ASU would have
a material effect on the Company’s consolidated financial statements.
In
February 2018, the FASB issued ASU No. 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification
of Certain Tax Effects from Accumulated Other Comprehensive Income”. The amendments eliminate the stranded tax effects resulting
from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. ASU No. 2018-02
is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.
The Company has not early adopted this update and it will become effective on July 1, 2019. The Company does not expect that the
adoption of this guidance will have a material impact on its consolidated financial statements.
In
February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall
(Subtopic 825-10), to provide guidance to clarify recognition and measurement of financial assets and financial liabilities. The
amendments clarify certain aspects of the guidance issued in ASU No. 2016-01. All entities may early adopt ASU No. 2018-03 for
fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, as long as they have adopted
Update 2016-01. The Company has not early adopted this update and it will become effective on July 1, 2018. The Company is currently
evaluating the impact of our pending adoption of ASU 2018-03 on its consolidated financial statements.
On
March of 2018, the FASB issued ASU 2018-05 - Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting
Bulletin No. 118 (“ASU 2018-05”), which amends the FASB Accounting Standards Codification and XBRL Taxonomy based on
the Tax Cuts and Jobs Act (the “Act”) that was signed into law on December 22, 2017 and Staff Accounting Bulletin No.
118 (“SAB 118”) that was released by the Securities and Exchange Commission. The Act changes numerous provisions that
impact U.S. corporate tax rates, business-related exclusions, and deductions and credits and may additionally have international
tax consequences for many companies that operate internationally. We have evaluated the impact of the Act as well as the guidance
of SAB 118 and incorporated the changes into the determination of a reasonable estimate of our deferred tax liability and appropriate
disclosures in the notes to our consolidated financial statements. We will continue to evaluate the impact this tax reform legislation
may have on our results of operations, financial position, cash flows and related disclosures.
The
Company does not believe other recently issued but not yet effective accounting statements, if recently adopted, would have a
material effect on the Company’s consolidated balance sheets, statements of income and comprehensive income and statements
of cash flows.
Reclassification
Certain
prior year amounts have been reclassified to conform to the current year presentation. These reclassifications have no effect
on the accompanying consolidated financial statements.
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
On
October 1, 2017, Rebel Group, Inc., a Florida corporation (the “Company”) entered into a Share Transfer
Agreement (the “Share Transfer”) with Naixin Qi, an individual (the “Shareholder”), the sole
shareholder of Qingdao Quanyao Sports Consulting Ltd, a company organized under the laws of PRC (the “Qingdao
Quanyao”). The Company believes that the acquisition will allow it to better manage opportunities.
Pursuant
to the Transfer Agreement, Pure Heart, through a wholly foreign owned entity (the “WOFE”) agreed to acquire 100% of
the outstanding equity interests (the “Equity Stake”) of the Qingdao Quanyao from the Shareholder with the purchase
price valued at approximately $7,000,000 consisting of the following: (i) the forgiveness of debt owed by the Qingdao Quanyao
to Pure Heart as of October 1, 2017, in the amount of approximately $2,825,000 (the “Forgiven Debts”) and (ii) 12,000,000
shares (the “Shares”) of the common stock of the Company, par value $0.0001 per share (the “Common Stock”)
(together the “Purchase Price”).
Qingdao
Quanyao holds 50% shares of Qingdao Leibo Sports Culture Co Ltd (“Leibo”) since January 8, 2015 (date of incorporation).
|
|
Consideration
|
|
|
|
|
|
Ordinary shares – 12,000,000
|
|
$
|
4,175,000
|
|
|
|
Other receivables – Qingdao Quanyao
|
|
|
2,825,000
|
|
|
|
Total consideration
|
|
|
7,000,000
|
|
|
|
|
|
|
|
|
|
|
Fair values of identifiable assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,870
|
|
|
|
Prepayment and deposit
|
|
|
10,992
|
|
|
|
Other receivables – Leibo
|
|
|
168,367
|
|
|
|
Other receivables - Others
|
|
|
94,914
|
|
|
|
Property and equipment, net
|
|
|
4,315
|
|
|
|
Total identifiable assets
|
|
|
280,458
|
|
|
|
Goodwill
|
|
|
6,719,542
|
|
|
|
Total
|
|
$
|
7,000,000
|
|
The goodwill of $6,719,542 arising from the acquisition consists largely of synergies and economies of scale expected from
combining the operations of Qingdao Quanyao. None of the goodwill recognized is expected to be deductible for income tax purpose.
There is no revenue and
earnings of Qingdao Quanyao since the acquisition date, which would be included in the consolidated income statement.
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
4
.
|
Property and
equipment
|
Property
and equipment are comprised of:
|
|
|
|
As of December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
103,126
|
|
|
$
|
77,860
|
|
|
|
Less: accumulated depreciation
|
|
|
(71,657
|
)
|
|
|
(48,669
|
)
|
|
|
Total property and equipment, net
|
|
$
|
31,469
|
|
|
$
|
29,191
|
|
The
depreciation expenses for the years ended December 31, 2017 and 2016 were $18,304 and $14,686, respectively.
Intangible
assets are comprised of:
|
|
|
|
As of December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademark
|
|
$
|
16,974
|
|
|
$
|
15,684
|
|
|
|
Other intangible assets
|
|
|
133,945
|
|
|
|
123,767
|
|
|
|
|
|
$
|
150,919
|
|
|
$
|
139,451
|
|
|
|
Less: accumulated amortization
|
|
|
(52,294
|
)
|
|
|
(35,943
|
)
|
|
|
Total intangible assets, net
|
|
$
|
98,625
|
|
|
$
|
103,508
|
|
No
significant residual value is estimated for these intangible assets. Amortization expense for the years ended December 31, 2017
and 2016, totaled $12,974 and $12,977, respectively. The following table represents the total estimated amortization of intangible
assets for the five succeeding years:
|
|
|
|
Estimated Amortization Expense
|
|
|
|
|
|
|
|
|
|
2018
|
|
$
|
13,394
|
|
|
|
2019
|
|
|
13,394
|
|
|
|
2020
|
|
|
13,394
|
|
|
|
2021
|
|
|
13,394
|
|
|
|
2022 and thereafter
|
|
|
45,049
|
|
|
|
|
|
$
|
98,625
|
|
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
The
changes in the carrying amount of goodwill were as follows:
|
|
|
|
As of December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
Goodwill arising from acquisition of Quanyao (Note 3)
|
|
|
6,719,542
|
|
|
|
-
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
Balance at the end of the year
|
|
$
|
6,719,542
|
|
|
$
|
-
|
|
The
Company performed its annual goodwill impairment review for the year ended December 31, 2017 and determined there was no impairment
as of December 31, 2017.
On
January 30, 2015, MOXC issued a convertible promissory note to the Company for $7,782,000 (the “MOXC Note”). The MOXC
Note would become due and payable on October 30, 2015. Under the MOXC Note, MOXC has the option to convert any and all amounts
due under the MOXC Note into the shares of MOXC’s shares of common stock (the “MOXC Common Stock”) at the conversion
price of $1.00 per share (“Conversion Price”), if the volume weighted average price (“VWAP”) of MOXC Common
Stock for 30 trading days immediately prior to the date of conversion is higher than the Conversion Price. MOXC also has a right
of first refusal to purchase the shares issuable upon conversion of the MOXC Note at the price of 80% of the VWAP of MOXC Common
Stock for 30 trading days immediately prior to the date of the proposed repurchase by MOXC.
On
August 14, 2015, due to the VWAP of the MOXC Common Stock for 30 trading day prior to August 14, 2015 is higher than $1.00, which
triggered the clause of conversion under the MOXC Note, MOXC notified the Company that it elected to convert the amount of $3,891,000
under the MOXC Note into 3,891,000 shares of the MOXC Common Stock at the conversion price of $1.00 (“August Conversion”).
As a result of the August Conversion, the remainder amount of the MOXC Note is $3,891,000.
On
September 28, 2015, MOXC notified the Company that it elected to convert the remainder of the MOXC Note, of $3,891,000 into 3,891,000
shares of the MOXC Common Stock (“September Conversion”). After the August Conversion and September Conversion, consequently,
all of the MOXC Note was converted into the total of 7,782,000 shares of the MOXC Common Stock with no amount of the MOXC Note
is outstanding as of December 31, 2015.
On
June 20, 2016, MOXC has approved a reverse stock split of the Company’s issued and outstanding shares of common stock at
a ratio of 1-for-2 (the “Reverse Stock Split”). As a result, 3,891,000 shares of the MOXC Common Stock are outstanding
as of December 31, 2017 and 2016 respectively.
|
|
|
|
As of December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
7,782,000
|
|
|
$
|
7,782,000
|
|
|
|
Fair value adjustment (including the effect of reverse stock split of $3,891,000 on June 20, 2016)
|
|
|
7,198,350
|
|
|
|
4,591,380
|
|
|
|
Total long-term investment
|
|
$
|
14,980,350
|
|
|
$
|
12,373,380
|
|
As
of December 31, 2017 and 2016, the fair value of MOXC was $3.85 and $3.18, respectively. For the years ended December 31, 2017
and 2016, the fair value gain (loss) of $2,606,970 and ($26,536,620) was recognized respectively. The Company has no intention
to sell the investment in the near future.
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
|
|
|
As of December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayable within one year
|
|
$
|
-
|
|
|
$
|
11,352
|
|
|
|
Total bank loan
|
|
$
|
-
|
|
|
$
|
11,352
|
|
The
interest expenses for the years ended December 31, 2017 and 2016 were $263 and $1,025, respectively.
On August 15, 2014, Pure Heart
and DBS Bank entered into a banking facility (the “Banking Facility”), pursuant to which DBS Bank disbursed Singapore
dollar $50,000 to Pure Heart for working capital. The interest rate of the loan is 6.00% per annum on monthly outstanding balance.
The term for the banking facility is three years. Pure Heart shall repay in 36 installments for Singapore dollar $1,522 each month.
Mr. Khian Kiee Leong and Mr. Aan Yee Leong, Justin, the directors of Pure Heart personally guaranteed the Banking Facility jointly
and severally. The bank loan was fully paid off as of December 31, 2017.
|
|
|
|
As of December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayable within one year
|
|
$
|
495,391
|
|
|
$
|
-
|
|
|
|
|
|
$
|
495,391
|
|
|
$
|
-
|
|
Interest expenses for the years ended December 31, 2017 and 2016 was $29,258 and $nil, respectively.
On
March 15, 2017, the Company, Khian Kiee Leong, and Bon Peng Lee (“Lee”) entered into an agreement to document
the loan of Singapore Dollars (“S$”) 50,000 ($35,715) that Lee advanced to the Company on March 15, 2017 and
shall be repayable on March 14, 2018 (“Repayment Date”), with an interest of 10% per annum. Lee may convert all
of the principal amount, into 71,430 shares of Company’s common stock after the Repayment Date.
On
March 24, 2017, the Company, Khian Kiee Leong, and Mui Ken Chiam (“Chiam”) entered into an agreement to document the
loan of S$200,000 ($142,856) that Chiam advanced to the Company on March 24, 2017 and shall be repayable on March 23, 2018 (“Maturity
Date”), with an interest of 10% per annum. Chiam shall have the option to extend the term of the loan from the Maturity
Date to March 23, 2019 (“Extended Maturity Date”). Chiam may convert all of the principal amount, into shares of Company’s
common stock (“Conversion Right”) at any time for the period commencing on the date hereof and ending on March 23,
2019 (“Conversion Period”). In the event that the Conversion Right is exercised within 7 Business Days immediately
following the Maturity Date, the conversion will be based on the share price of $0.50. In the event that the Conversion Right
is exercised after the Maturity Date but within 7 Business Days immediately following the Extended Maturity Date, the conversion
will be based on the share price of $0.60.
The company is still in discussion
with Lee and Chiam to extend the convertible loans as of the reporting date.
On
May 5, 2017, the Company, Khian Kiee Leong, and Chee Keong Teng (“Teng”) entered into an agreement to document the
loan of $300,000 that Teng advanced to the Company on May 5, 2017 and shall be repayable on May 4, 2018 (“Maturity Date”),
with an interest of 10% per annum. Teng shall have the option to extend the term of the loan from the Maturity Date to May 4,
2019 (“Extended Maturity Date”). Teng may convert all of the principal amount, into shares of Company’s common
stock (“Conversion Right”) at any time for the period commencing on the date hereof and ending on May 4, 2019 (“Conversion
Period”). In the event that the Conversion Right is exercised within 7 Business Days immediately following the Maturity
Date, the conversion will be based on the share price of $0.50. In the event that the Conversion Right is exercised after the
Maturity Date but within 7 Business Days immediately following the Extended Maturity Date, the conversion will be based on the
share price of $0.60.
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
As
of December 31, 2017 and 2016, the due to shareholders is $1,178,675 and $1,026,432 respectively. The amount is unsecured, interest
free due on demand and has no fixed terms of repayment.
On
January 30, 2015, the Company, Rebel FC and the stockholder of Rebel FC who owned 100% of Rebel FC (the “Rebel FC Stockholder”)
entered into and consummated transactions pursuant to a Share Exchange Agreement, whereby the Company issued to the Rebel FC Stockholder
an aggregate of 20,700,000 shares of its Common Stock, in exchange for 100% of the equity interests of Rebel FC held by the Rebel
FC Stockholder. The shares of our Common Stock received by the Rebel FC Stockholder in the Share Exchange Transaction constitute
approximately 90% of our issued and outstanding Common Stock giving effect to the issuance of shares pursuant to the Share Exchange
Agreement. As a result of the Share Exchange Transaction, Rebel FC, together with its subsidiaries, Pure Heart and SCA Capital,
became the Company’s wholly-owned subsidiaries.
For
the year ended December 31, 2017, the Company issued shares of common stock 7,796,890 for cash consideration $3,019,715 and 665,000 shares for service. And
the Company further issued 12,000,000 shares of common stock for acquisition of subsidiaries Qingdao Quanyao (See Note 3 to
the consolidated financial statements for detail).
The
Company and its subsidiaries file separate income tax returns.
The
United States of America
Rebel
Group, Inc. is incorporated under the laws of the State of Florida in the U.S., and is subject to U.S. federal corporate income
tax. The State of Florida imposes corporate state income tax at 5.5%. As of December 31, 2017, future net operating losses of
approximately $2.8 million are available to offset future operating income through 2036.
On
December 22, 2017, the 2017 Tax Act was enacted into law. Beginning January 1, 2018, the 2017 Tax Act reduces the U.S. federal
corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries
that were previously tax deferred, creates new taxes on certain foreign sourced earnings, repeals the Alternative Minimum Tax
(“AMT”), and expands the number of individuals whose compensation is subject to a $1.0 million cap on deductibility,
amongst other changes. In certain cases, as described below, we have made a reasonable estimate of the effects on our existing
deferred tax balances and refundable AMT credit. In other cases, we have not been able to make a reasonable estimate and continue
to account for those items based on our existing accounting and the provisions of the tax laws that were in effect immediately
prior to enactment. We will continue to refine our calculations as additional analysis is completed.
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
One-time
transitional tax. As part of the 2017 Tax Act, total foreign earnings and profits (“E&P”) after 1986, that were
previously deferred from U.S. federal taxation, are subject to a one-time tax on the mandatory deemed repatriation of foreign
earnings. The Company’s provisional analysis of the one-time transition tax resulted in no additional taxes being owed due
to the overall accumulated E&P deficit for the income tax purpose.
With
respect to global intangible low-taxed income (“GILTI”) provisions of the 2017 Tax Act, the Company is continuing
to evaluate how the provisions will be accounted for. The GILTI provisions allow companies to make an accounting policy election
to either (i) account for GILTI as a component of tax expense in the period in which the entity is subject to the rules or (ii)
account for GILTI in the entity’s measurement of deferred taxes. As of December 31, 2017, the Company has not elected a
method due to its continuing analysis of the GILTI provisions. The elected method will depend, in part, on analyzing global income.
British
Virgin Islands
Rebel
FC and SCA Capital are incorporated in the British Virgin Islands and are not subject to income taxes under the current laws of
the British Virgin Islands.
Singapore
Pure
Heart was incorporated in Singapore and is subject to Singapore corporate income tax at 17%.
People
of Republic China (“PRC”)
Rebel
Shanghai and Qingdao Quanyao were incorporated in PRC and are subject to statutory Enterprise Income Tax rate of the PRC at 25%.
The
Company has a number of open tax years which include the tax years ended December 31, 2014, 2015 and 2016 that have not been filed.
While it is often difficult to predict the final outcome or the timing of uncertain tax position, the Company believes that the
accruals for the income taxes reflect the most likely outcome for the unfiled tax years. The Company had approximately $40,000
and nil of interest and penalties accrued at December 31, 2017 and 2016, respectively.
Based
upon management’s assessment of all available evidence, the Company believes that it is more-likely-than-not that the deferred
tax assets, primarily for certain of the subsidiaries NOL carry-forwards will not be realizable; and therefore, a full valuation
allowance is established for NOL carry-forwards. The valuation allowance for deferred tax assets was approximately $904,000 and
$904,000 as of December 31, 2017 and 2016, respectively.
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
The
Company does not anticipate any significant increase to its liability for unrecognized tax benefit within the next 12 months.
The Company will classify interest and penalties related to income tax matters, if any, in income tax expense.
|
|
|
|
As of December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Income tax expense is comprised of:
|
|
|
|
|
|
|
|
|
Current income tax
|
|
$
|
44,507
|
|
|
$
|
-
|
|
|
|
Deferred income tax expense (benefit)
|
|
|
-
|
|
|
|
-
|
|
|
|
Total income taxes expense
|
|
$
|
44,507
|
|
|
$
|
-
|
|
The
Company’s effective income tax rates were 2% and 0% for the years ended December 31, 2017 and 2016, respectively. Income
tax mainly consists of foreign income tax at statutory rates and the effects of permanent and temporary differences.
The
following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the years ended December 31,
2017 and 2016.
|
|
|
|
As of December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. statutory rates
|
|
|
21%
|
|
|
|
34%
|
|
|
|
Foreign income not recognized in the U.S.
|
|
|
(21%
|
)
|
|
|
(34%
|
)
|
|
|
Effect of permanent difference (1)
|
|
|
2%
|
|
|
|
-
|
|
|
|
Effective income tax rates
|
|
|
2%
|
|
|
|
0%
|
|
|
|
(1)
|
Permanent
difference consisted of mainly income tax non-deductible items, income tax penalty and
interest.
|
Deferred
income taxes are recognized for tax consequences in future years of differences between the tax bases of assets and liabilities
and their reported amounts in the financial statements at each year-end and tax loss carry forwards. Deferred income tax was measured
using the enacted income tax rates for the periods in which they are expected to be reversed. The tax effects of temporary differences that
give rise to the following approximate deferred tax liabilities as of December 31, 2017 and 2016 are presented below:
|
|
|
|
As of December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized fair value gains on long-term investment
|
|
$
|
3,145,874
|
|
|
$
|
1,606,983
|
|
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
13.
|
Related party
transactions
|
As
at December 31, 2017 and 2016, amounts due to shareholders were $1,178,675 and $1,026,432 respectively. The amounts are unsecured,
interest free due on demand and does not have a fixed repayment date.
A
summary of changes in the amount due to the chairman of the Company is as follows:
|
|
|
|
As
of December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
At beginning
of year
|
|
$
|
978,974
|
|
|
$
|
758,064
|
|
|
|
Advance
(Repayment) from shareholder, net
|
|
|
49,745
|
|
|
|
220,910
|
|
|
|
At end of year
|
|
$
|
1,028,719
|
|
|
$
|
978,974
|
|
A
summary of changes in the amount due to the CEO of the Company is as follows:
|
|
|
|
As
of December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of year
|
|
$
|
47,458
|
|
|
$
|
16,573
|
|
|
|
Advance
(Repayment) from shareholder, net
|
|
|
102,498
|
|
|
|
30,885
|
|
|
|
End
of year
|
|
$
|
149,956
|
|
|
$
|
47,458
|
|
As
at December 31, 2017 and 2016, trade and other receivables – related party was $271,142 and $nil respectively. The amounts
is unsecured, interest free and does not has a fixed repayment date.
A
summary of changes in the amount due from Qingdao Leibo Sports Culture Co Ltd is as follows:
|
|
|
|
As
of December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
Advances received for the year
|
|
|
271,142
|
|
|
|
-
|
|
|
|
End of
year
|
|
$
|
271,142
|
|
|
$
|
-
|
|
REBEL
GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
|
14.
|
Commitments and
contingencies
|
Operating
Lease
The
Company’s subsidiaries lease administrative office space under various operating lease rent expense amounted to $61,536
and $29,027 for the years ended December 31, 2017 and 2016, respectively.
Further
minimum lease payment under non-cancelable operating leases are as follows:
|
|
Twelve months ending December 31,
|
|
|
|
|
|
2018
|
|
$
|
139,895
|
|
|
|
2019
|
|
|
139,895
|
|
|
|
2020
|
|
|
128,236
|
|
|
|
Total minimum lease payments
|
|
$
|
408,026
|
|
Legal
Proceeding
There
has been no legal proceeding in which the Company is a party for the years ended December 31, 2017 and 2016.
As
of March 16, 2018, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with a third party
investor (the “Investor”). The Investor is expected to remit three equal instalments in the amount of $1 million each,
and $3 million in the aggregate, in exchange for 3 million shares of the Company’s common stock as determined pursuant to
the terms and conditions of the Subscription Agreement. Pursuant to the Subscription Agreement, all three instalments are expected
to be remitted prior to December 31, 2018.
The
foregoing description of the terms of the Subscription Agreement does not purport to be complete and is subject to, and qualified
in its entirely by, the full text of the Subscription Agreement, which is expected to be filed as an exhibit to the Company’s
upcoming periodic report.
Except
of the above, there were no events or transactions other than those disclosed in this report, if any, that would require recognition
or disclosure in our financial statements for the year ended December 31, 2017.
F-25